##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 000-30586
 
 IVANHOE ENERGY INC.
  Yukon, Canada
(State or other jurisdiction of 
incorporation or organization)
    
    98-0372413
(I.R.S. Employer
Identification No.)654-999 Canada Place 
Vancouver, British Columbia, Canada
(Address of principal executive offices)
    
    V6C 3E1
(Zip Code)
 (604) 688-8323
    Title of each class
    
    Name of each exchange on which registeredCommon Shares, no par value
    
    Toronto Stock Exchange
NASDAQ Capital Market
 o Yes þ No
 o þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o(Do not check if a smaller reporting
company)
    
    Smaller reporting company o
 o Yes þ No
   Class
    
    Outstanding at March 10, 2010Common Shares, no par value
    
    324,928,513 shares
 DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 PagePART IItems 1 and 2 Business and Properties
    
    
    4General
    
    
    4Corporate Strategy
    
    
    6Integrated Oil and Gas Properties
    
    
    8Conventional Oil and Gas Properties
    
    
    8Business and Technology Development
    
    
    11Certain Factors Affecting the Business
    
    
    12Employees
    
    
    14Production, Wells and Related Information
    
    
    14Item 1A Risk Factors
    
    
    15Item 1B Unresolved Staff Comments
    
    
    22Item 3 Legal Proceedings
    
    
    22Item 4 Reserved
    
    
    22PART IIItem 5 Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    23Item 6 Selected Financial Data
    
    
    25Item 7 Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    27Item 7A Quantitative and Qualitative Disclosures About Market Risk
    
    
    52Item 8 Financial Statements and Supplementary Data
    
    
    55Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
    
    
    106Item 9A Controls and Procedures
    
    
    106Item 9B Other Information
    
    
    108PART IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    
    109Item 11 Executive Compensation
    
    
    113Item 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    127Item 13 Certain Relationships and Related Transactions, and Director Independence
    
    
    128Item 14 Principal Accounting Fees and Services
    
    
    129PART IVItem 15 Exhibits, Financial Statement Schedules
    
    
    130Exhibit 10.4Exhibit 10.20Exhibit 21.1Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2Exhibit 99.1
   2




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CURRENCY AND EXCHANGE RATES
 dollars $ Cdn.$
 2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Closing
    
    $
    0.96
    
    
    $
    0.82
    
    
    $
    1.01
    
    
    $
    0.86
    
    
    $
    0.86Low
    
    $
    0.77
    
    
    $
    0.77
    
    
    $
    0.84
    
    
    $
    0.85
    
    
    $
    0.79High
    
    $
    0.97
    
    
    $
    1.01
    
    
    $
    1.09
    
    
    $
    0.91
    
    
    $
    0.87Average Noon
    
    $
    0.88
    
    
    $
    0.94
    
    
    $
    0.94
    
    
    $
    0.88
    
    
    $
    0.83
  ABBREVIATIONS
  Bbl
    
    = barrelBbls/d
    
    = barrels per dayBopd
    
    = barrels of oil per dayBoe
    
    = barrel of oil equivalentBoe/d
    
    = barrels of oil equivalent per dayMBbl
    
    = thousand barrelsMBbls/d
    
    = thousand barrels per dayMboe
    
    = thousands of barrels of oil equivalentMboe/d
    
    = thousands of barrels of oil
equivalent per dayMMBbl
    
    = million barrelsMMBls/d
    
    = million barrels per dayMcf
    
    = thousand cubic feetMcf/d
    
    = thousand cubic feet per dayMMBtu
    
    = million British thermal unitsMMcf
    
    = million cubic feetMMcf/d
    
    = million cubic feet per day
 equivalents
 SELECT DEFINED TERMS
 Ivanhoe Energy Ivanhoe the Company
 RTP TM Process HTL TM Technology HTL TM
 Syntroleum GTL Technology GTL
 SEC
 CSA
 Act
 EOR
 SAGD
 MOU
 TSX
  3




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##### Table of Contents



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 oil upgrading 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 a limited number of what appear to be promising oil and gas exploration
properties from larger, more well-financed oil and gas companies; and
    
    other statements contained herein regarding matters that are not historical facts.
  AVAILABLE INFORMATION
 www.ivanhoeenergy.com www.sec.gov www.sedar.com
 
 ITEMS 1 AND 2 BUSINESS AND PROPERTIES
 
 GENERAL
 TM
  4




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TM TM TM TM
    Oil and Gas
 Integrated
 TM
 Conventional
  Business and Technology Development
 TM
  5




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##### Table of Contents



TM
 Corporate
 ,
    
 CORPORATE STRATEGY
 Importance of the Heavy Oil Segment of the Oil and Gas Industry
      Ivanhoes Value Proposition
 TM
  6




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##### Table of Contents



1.
    
    Virtual elimination of external energy requirements for steam generation and/or power
for upstream operations.2.
    
    Elimination of the need for diluent or blend oils for transport.3.
    
    Capture of the majority of the heavy versus light oil value differential.4.
    
    Relatively small minimum economic scale of operations suited for field upgrading and
for smaller field developments.
 TM
 Implementation Strategy
   1.
    
    Build a portfolio of major HTLTMprojects.Continue to deploy the personnel
and the financial resources in support of our goal to capture additional opportunities for
development projects utilizing the Companys HTLTM Technology.2.
    
    Advance the technology.Additional development work will continue to advance the
technology through the first commercial application and beyond.3.
    
    Enhance the Companys financial position in anticipation of major projects.
Implementation of large projects requires significant capital outlays. The Company is
working on various financing plans and establishing the relationships required for the
development activities of the future.4.
    
    Build internal capabilities.During 2009, the Company added two key executives; one to
take up the role of President and CEO of its Canadian subsidiary and one to fill the
Corporate CFO role, vacated through retirement. In addition, the Company continued to build
its internal technical capabilities through the addition of senior subsurface engineering
talent as well as senior environmental leadership. These new staff will join existing
execution teams as they advance the Companys first HTLTM projects. The existing
upstream teams consist of a number of experienced heavy oil petroleum engineers and
geologists complemented by a core team of geotechnical experts. The Houston-based
HTLTM technology team is built on a number of engineers that have an extensive
background in chemical and petroleum refining, project engineering and the development and
management of intellectual property. The Company expects to continue filling key positions
as its projects advance.5.
    
    Build the relationships needed for the future.Commercialization of the Companys
technologies demands close alignment with partners, suppliers, host governments and
financiers.
  7




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INTEGRATED OIL AND GAS PROPERTIES
 Tamarack Project
 Talisman) Tamarack Project Tamarack
 SOR
 TM
 TM
 Ecuador Project
  TM
 TM TM
   
 CONVENTIONAL OIL AND GAS PROPERTIES
   8




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Percentage
    
    
    12/31/2009
    
    
    Percentage of2009
    
    
    of Total
    
    
    Proved
    
    
    Total EstimatedProduction
    
    
    2009
    
    
    Reserves
    
    
    ProvedProperty
    
    Location
    
    (in MBoe)
    
    
    Production
    
    
    (in MBoe)
    
    
    ReservesDagang
    
    Hebei Province, China
    
    
    453
    
    
    
    97
    %
    
    
    1,032
    
    
    
    94
    %Other
    
    China
    
    
    13
    
    
    
    3
    %
    
    
    69
    
    
    
    6
    %Total
    
    
    
    
    466
    
    
    
    100
    %
    
    
    1,101
    
    
    
    100
    %
 Note:
    
    See the Supplementary Disclosures About Oil and Gas Production Activities (Unaudited),
which follow the notes to our consolidated financial statements set forth in Item 8 in this Annual
Report on Form 10-K, for certain details regarding the Companys oil and gas proved reserves, the
estimation process and production by country. Estimates for our China operations were prepared by
independent petroleum consultant GLJ Petroleum Consultants Ltd. We have not filed with nor included
in reports to any other U.S. federal authority or agency, any estimates of total proved crude oil
or natural gas reserves since the beginning of the last fiscal year. Internal Control over Reserve Reporting
 SEA
 Special Note to Canadian Investors
 National Instrument 51-101 
Standards of Disclosure for Oil and Gas Activities NI 51-101
 COGE Handbook
  
    
    SEC registrants apply SEC reserves definitions and prepare their reserves estimates in
accordance with SEC requirements and generally accepted industry practices in the U.S.
whereas NI 51-101 requires adherence to the definitions and standards promulgated by the
COGE Handbook;
  9




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
    
    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.
  China
 
    
    Production and Development
 CNPC Dagang field
 Richfirst CITIC
  WTI
 
    
    Exploration
 Zitong Contract Mitsubishi Phase I
  10




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Zitong Partners Phase II
 Mongolia
 
    
    Exploration
 (the Nyalga contract
 (the MRPAM)
 
 BUSINESS AND TECHNOLOGY DEVELOPMENT
 Heavy to Light Oil Upgrading
 
    
    RTPTMLicense and Patents
 Ensyn TM TM TM TM
 
    
    Commercial Demonstration Facility
 CDF
  11




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VTBs TM TM
 TM
  
    
    Feedstock Test Facility
 FTF TM TM TM SwRI TM
 Business Development
 TM
 
 CERTAIN FACTORS AFFECTING THE BUSINESS
 Competition
   12




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Environmental Regulations
 TM
      Environmental Provisions
  Government Regulations
   13




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EMPLOYEES
  
 PRODUCTION, WELLS AND RELATED INFORMATION
   Average Sales Price
    
    
    Average Operating Costs2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2007Crude Oil ($/Boe)China
    
    $
    53.60
    
    
    $
    98.73
    
    
    $
    64.86
    
    
    $
    21.88
    
    
    $
    43.92
    
    
    $
    26.88
  2009
    
    
    2008
    
    
    2007Oil Wells
    
    
    Gas Wells
    
    
    Oil Wells
    
    
    Gas Wells
    
    
    Oil Wells
    
    
    Gas WellsGross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetChina
    
    
    44
    
    
    
    21.6
    (1)
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    36.1
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    36.1
    
    
    
    
    
    
    
    
 
 (1)
    
    Net wells were reduced down to 49% after our working interest was decreased when we
reached Cost Recovery.  Exploratory
 Productive Wells
    
    
    Dry Wells2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2007Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    GasChina
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9
 Development
 Productive Wells
    
    
    Dry Wells2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2007Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    GasChina
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Wells in Progress
   14




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Acreage
  Developed Acres
    
    
    Undeveloped AcresGross
    
    
    Net
    
    
    Gross
    
    
    NetCanada
    
    
    
    
    
    
    
    
    
    
    7,520
    
    
    
    7,520Ecuador
    
    
    
    
    
    
    
    
    
    
    272,639
    
    
    
    272,639China (1)
    
    
    1,490
    
    
    
    730
    
    
    
    664,348
    
    
    
    595,355Mongolia
    
    
    
    
    
    
    
    
    
    
    4,161,422
    
    
    
    4,161,422
 
 (1)
    
    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.      
 ITEM 1A. RISK FACTORS
  We may not be able to meet our substantial capital requirements
  Our ability to continue as a going concern in the future may be adversely affected by a lack of
access to adequate funding sources
   15




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We have fixed and contingent payment obligations to Talisman Energy
  Our HTL projects in Canada and Ecuador are at a very early stage of development
  Heavy oil exploration and development involves increased operational risks
   16




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SAGD technologies for in-situ recovery of heavy oil and bitumen are energy intensive and may be
unsustainable
  We might not successfully commercialize our technology, and commercial-scale HTL TM plants based on our technology may never be successfully constructed or operated
  A breach of confidentiality obligations could put us at competitive risk and potentially damage our
business
  Our efforts to commercialize our HTL Technology may give rise to claims of infringement upon the
patents or proprietary rights of others
  Technological advances could significantly decrease the cost of upgrading heavy oil and, if we are
unable to adopt or incorporate technological advances into our operations, our HTL TM Technology could become uncompetitive or obsolete
   17




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The development of alternate sources of energy could lower the demand for our HTL Technology
  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
  Our ability to monetize non-core assets and replace revenues generated from any sale of our
existing properties depends upon market conditions and numerous uncertainties
  Our heavy oil project in Canada may be exposed to title risks and aboriginal claims
    18




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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
    Estimates of proved reserves and future net revenue may change if the assumptions on which such
estimates are based prove to be inaccurate
  No reserves have yet been established in respect of our HTL projects in Canada and Ecuador
  Information in this document regarding our future plans reflects our current intent and is subject
to change
   19




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Our business may be harmed if we are unable to retain our interests in licenses, leases and
production sharing contracts
  We may incur significant costs on exploration or development efforts which may prove unsuccessful
or unprofitable
  Our business involves many operating risks that can cause substantial losses; insurance may not
protect us against all these risks
   Changes to laws, regulations and government policies in Canada or Ecuador could adversely affect
our ability to develop our HTL projects
     20




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Complying with environmental and other government regulations could be costly and could negatively
impact our production
    Climate Change and Emissions
Management Act
 Climate Change and Emissions
Management Act
  We compete for oil and gas properties with many other exploration and development companies
throughout the world who have access to greater resources
   21




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Our principal shareholder may significantly influence our business
   If we lose our key management and technical personnel, our business may suffer
   
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 3. LEGAL PROCEEDINGS
    
 ITEM 4. RESERVED
  22




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 Market Information
  NASDAQ CAPITAL MARKET (IVAN)
(U.S.$)
 2009
    
    
    20084th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr
    
    
    4th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st QtrHigh
    
    
    3.12
    
    
    
    2.81
    
    
    
    1.85
    
    
    
    1.22
    
    
    
    1.43
    
    
    
    3.51
    
    
    
    3.77
    
    
    
    1.97Low
    
    
    2.02
    
    
    
    1.13
    
    
    
    1.10
    
    
    
    0.45
    
    
    
    0.35
    
    
    
    1.21
    
    
    
    1.79
    
    
    
    1.24
 TSX (IE)
(CDN$)
 2009
    
    
    20084th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr
    
    
    4th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st QtrHigh
    
    
    3.25
    
    
    
    2.98
    
    
    
    2.16
    
    
    
    1.53
    
    
    
    1.53
    
    
    
    3.37
    
    
    
    3.85
    
    
    
    1.99Low
    
    
    2.20
    
    
    
    1.31
    
    
    
    1.38
    
    
    
    0.57
    
    
    
    0.43
    
    
    
    1.28
    
    
    
    1.82
    
    
    
    1.27
  Exemptions from Certain NASDAQ Marketplace Rules
 NASDAQ
   Enforceability of Civil Liabilities
 Form 10-K.
  23




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Holders of Common Shares
  Dividends
 Yukon Business Corporations Act
 Exchange Controls and Taxation
  Investment Canada Act Investment Act Canadian WTO
investor Cultural Business
    24




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Income Tax Act Convention
 Securities Authorized for Issuance under Equity Compensation Plans
  Performance Graph
  Sales of Unregistered Securities
   
    
    in November 2007, we issued 2,000,000 common shares under Rule 903 of the Act at a price
of U.S.$2.00 to an institutional investor pursuant to the exercise of previously issued
share purchase warrants.
 
 ITEM 6. SELECTED FINANCIAL DATA
 GAAP
  25




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December 312009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(stated in thousands of US dollars, except per share amounts)Results of OperationsRevenues
    
    
    23,658
    
    
    
    50,670
    
    
    
    26,689
    
    
    
    36,320
    
    
    
    15,965Net loss from continuing operations
    
    
    (37,731
    )
    
    
    (38,476
    )
    
    
    (33,433
    )
    
    
    (25,677
    )
    
    
    (15,983
    )Net loss from continuing operationsper share  basic and diluted
    
    
    (0.13
    )
    
    
    (0.15
    )
    
    
    (0.14
    )
    
    
    (0.11
    )
    
    
    (0.08
    )Financial PositionTotal assets
    
    
    281,763
    
    
    
    346,875
    
    
    
    266,516
    
    
    
    278,144
    
    
    
    270,477Long-term debt
    
    
    36,934
    
    
    
    37,855
    
    
    
    9,812
    
    
    
    2,737
    
    
    
    4,000Asset retirement obligations  long term
    
    
    195
    
    
    
    1,928
    
    
    
    739
    
    
    
    484
    
    
    
    100Long term obligation
    
    
    1,900
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    1,900Shareholders equity
    
    
    208,029
    
    
    
    257,427
    
    
    
    197,287
    
    
    
    228,386
    
    
    
    204,767Common shares outstanding (in thousands)
    
    
    282,559
    
    
    
    279,381
    
    
    
    244,874
    
    
    
    241,216
    
    
    
    220,779Cash FlowCash flow provided by (used in) operating activities
    
    
    (12,290
    )
    
    
    17,053
    
    
    
    5,489
    
    
    
    14,352
    
    
    
    9,870Capital investments (continuing operations)
    
    
    (26,373
    )
    
    
    (21,063
    )
    
    
    (28,585
    )
    
    
    (12,296
    )
    
    
    (36,741
    )
 
 All information has been revised as originally presented to
conform with the presentation of the discontinued operations 2009
respecting the sale by the Company of all of its oil and gas
exploration and production operations in the United States. See
Note 19 to our financial statements under Item 8 in this
Annual Report on Form 10-K. Reconciliation to U.S. GAAP
   December 312009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(stated in thousands of US dollars, except per share amounts)Results of OperationsRevenues
    
    
    17,152
    
    
    
    55,335
    
    
    
    27,281
    
    
    
    35,628
    
    
    
    18,831Net loss from continuing operations
    
    
    (32,679
    )
    
    
    (47,911
    )
    
    
    (23,080
    )
    
    
    (35,477
    )
    
    
    (13,773
    )Net loss from continuing operationsper share  basic and diluted
    
    
    (0.12
    )
    
    
    (0.19
    )
    
    
    (0.10
    )
    
    
    (0.15
    )
    
    
    (0.07
    )Financial PositionTotal assets
    
    
    262,717
    
    
    
    292,847
    
    
    
    251,627
    
    
    
    252,893
    
    
    
    254,335Long-term debt
    
    
    38,005
    
    
    
    40,392
    
    
    
    10,412
    
    
    
    2,737
    
    
    
    4,000Asset retirement obligations  long term
    
    
    195
    
    
    
    1,928
    
    
    
    739
    
    
    
    484
    
    
    
    100Long term obligation
    
    
    1,900
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    1,900Shareholders equity
    
    
    179,663
    
    
    
    199,741
    
    
    
    170,545
    
    
    
    189,829
    
    
    
    188,745Cash FlowCash flow provided by (used in) operating activities
    
    
    (12,441
    )
    
    
    16,639
    
    
    
    11,501
    
    
    
    13,340
    
    
    
    5,042Capital investments (continuing operations)
    
    
    (26,223
    )
    
    
    (20,649
    )
    
    
    (28,319
    )
    
    
    (11,280
    )
    
    
    (31,913
    )
 
 All information has been revised as originally presented to conform with the presentation of
the discontinued operations 2009 respecting the sale by the Company of all of its oil and gas
exploration and production operations in the United States. See Note 21 to our
financial statements under Item 8 in this Annual Report on Form 10-K.  26




---



##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 TABLE OF CONTENTS
 PageIvanhoe Energys Business
    
    
    27Executive Overview of 2009 Results
    
    
    28Financial Results  Year to Year Change in Net Loss
    
    
    30Revenues and Operating Costs
    
    
    31General and Administrative
    
    
    33Business and Technology Development
    
    
    34Foreign Exchange
    
    
    34Net Interest
    
    
    34Unrealized Gain (Loss) on Derivative Instruments
    
    
    34Depletion and Depreciation
    
    
    35Provision for Impairment of Intangible Assets and Development Costs
    
    
    35Write-off of Deferred Financing Costs
    
    
    36Provision for Impairment of Oil and Gas Properties
    
    
    36Net income (loss) from Discontinued Operations
    
    
    36Financial Condition, Liquidity and Capital Resources
    
    
    38Sources and Uses of Cash
    
    
    38Outlook for 2010
    
    
    41Contractual Obligations and Commitments
    
    
    41Critical Accounting Principles and Estimates
    
    
    412009 Accounting Changes
    
    
    44Impact of New and Pending Canadian GAAP Accounting Standards
    
    
    45Convergence of Canadian GAAP with International Financial Reporting Standards
    
    
    46Impact of New and Pending U.S. GAAP Accounting Standards
    
    
    49Off Balance Sheet Arrangements
    
    
    51Related Party Transactions
    
    
    52
 GAAP
  
 IVANHOE ENERGYS BUSINESS
 TM
  27




---



##### Table of Contents



TM TM TM TM
 TM TM TM
 
 EXECUTIVE OVERVIEW OF 2009 RESULTS
  TM
  TM TM
  Oil and Gas
 Integrated
 TM
 Conventional
   28




---



##### Table of Contents



Business and Technology Development
 TM
  Corporate
 ,
 Summary table of financial data
 Year ended December 31,2009
    
    
    2008
    
    
    2007Oil revenues
    
    $
    24,968
    
    
    $
    48,370
    
    
    $
    31,365Net loss from continuing operations
    
    $
    (37,731
    )
    
    $
    (38,476
    )
    
    $
    (33,433
    )Net loss from continuing operations
per share  basic and diluted
    
    $
    (0.13
    )
    
    $
    (0.15
    )
    
    $
    (0.14
    )Net loss and comprehensive loss
    
    $
    (61,652
    )
    
    $
    (34,193
    )
    
    $
    (39,207
    )Net loss per share  basic and diluted
    
    $
    (0.22
    )
    
    $
    (0.13
    )
    
    $
    (0.16
    )Average production (Boe/d)
    
    
    1,276
    
    
    
    1,339
    
    
    
    1,325Net revenue (loss) from operations per Boe
    
    $
    (6.98
    )
    
    $
    7.59
    
    
    $
    (1.75
    )Cash flow provided by (used in) operating
activities from continuing operations
    
    $
    (14,993
    )
    
    $
    10,780
    
    
    $
    1,168Cash flow provided by (used in) operating activities
    
    $
    (12,290
    )
    
    $
    17,053
    
    
    $
    5,489Capital investments (continuing operations)
    
    $
    (26,373
    )
    
    $
    (21,063
    )
    
    $
    (28,585
    )
  29




---



##### Table of Contents



FINANCIAL RESULTS  YEAR TO YEAR CHANGE IN NET LOSS
  Favorable
    
    
    
    
    
    
    Favorable(Unfavorable)
    
    
    
    
    
    
    (Unfavorable)2009
    
    
    Variances
    
    
    2008
    
    
    Variances
    
    
    2007Summary of Net Loss by Significant
Components:Oil Revenues:
    
    $
    24,968
    
    
    
    
    
    
    $
    48,370
    
    
    
    
    
    
    $
    31,365Production volumes
    
    
    
    
    
    $
    (2,384
    )
    
    
    
    
    
    $
    398Oil prices
    
    
    
    
    
    
    (21,018
    )
    
    
    
    
    
    
    16,607Realized gain (loss) on derivative instruments
    
    
    124
    
    
    
    4,554
    
    
    
    (4,430
    )
    
    
    (4,096
    )
    
    
    (334
    )Operating costs
    
    
    (10,191
    )
    
    
    11,324
    
    
    
    (21,515
    )
    
    
    (8,515
    )
    
    
    (13,000
    )General and administrative, less
stock based compensation
    
    
    (18,002
    )
    
    
    (6,198
    )
    
    
    (11,804
    )
    
    
    (4,127
    )
    
    
    (7,677
    )Business and technology development,
less stock based compensation
    
    
    (9,343
    )
    
    
    (3,458
    )
    
    
    (5,885
    )
    
    
    2,715
    
    
    
    (8,600
    )Net interest
    
    
    (301
    )
    
    
    283
    
    
    
    (584
    )
    
    
    (548
    )
    
    
    (36
    )Current income tax provision
    
    
    (1,757
    )
    
    
    (1,103
    )
    
    
    (654
    )
    
    
    (654
    )
    
    
    Unrealized gain (loss) on derivative instruments
    
    
    (1,459
    )
    
    
    (7,577
    )
    
    
    6,118
    
    
    
    10,777
    
    
    
    (4,659
    )Foreign Exchange Loss
    
    
    (5,220
    )
    
    
    (3,693
    )
    
    
    (1,527
    )
    
    
    (1,226
    )
    
    
    (301
    )Depletion and depreciation
    
    
    (19,868
    )
    
    
    5,893
    
    
    
    (25,761
    )
    
    
    (5,121
    )
    
    
    (20,640
    )Stock based compensation
    
    
    (3,849
    )
    
    
    (833
    )
    
    
    (3,016
    )
    
    
    135
    
    
    
    (3,151
    )Provision for impairment of intangible asset and
development costs
    
    
    (1,903
    )
    
    
    13,151
    
    
    
    (15,054
    )
    
    
    (15,054
    )
    
    
    Impairment of oil and gas properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,130
    
    
    
    (6,130
    )Write off of deferred financing costs
    
    
    
    
    
    
    2,621
    
    
    
    (2,621
    )
    
    
    (2,621
    )
    
    
    Future income tax recovery
    
    
    9,600
    
    
    
    9,600
    
    
    
    
    
    
    
    
    
    
    
    Discontinued operations (net of tax)
    
    
    (23,921
    )
    
    
    (28,204
    )
    
    
    4,283
    
    
    
    10,057
    
    
    
    (5,774
    )Other
    
    
    (530
    )
    
    
    (417
    )
    
    
    (113
    )
    
    
    157
    
    
    
    (270
    )Net Loss
    
    $
    (61,652
    )
    
    $
    (27,459
    )
    
    $
    (34,193
    )
    
    $
    5,014
    
    
    $
    (39,207
    )
    30




---



##### Table of Contents



Revenues and Operating Costs
 Asia
    
    Oil Prices 2009 vs. 2008
  
    
    Oil Prices 2008 vs. 2007
  
    
    Realized Gain (Loss) on Derivatives
  Year Ended


    Favorable
    
    
    Year Ended
    
    
    Favorable
    
    
    Year EndedDecember 31,

    (Unfavorable)
    
    
    December 31,
    
    
    (Unfavorable)
    
    
    December 31,2009
    

    Variances
    
    
    2008
    
    
    Variances
    
    
    2007$
    124


    $
    4,554
    
    
    $
    (4,430
    )
    
    $
    (4,096
    )
    
    $
    (334
    )
 
    
    Production Volumes
  Years Ended December 31,
    
    
    Years Ended December 31,Net Boes
    
    
    Percentage
    
    
    Net Boes
    
    
    Percentage2009
    
    
    2008
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeChina:Dagang
    
    
    452,573
    
    
    
    471,817
    
    
    
    -4
    %
    
    
    471,817
    
    
    
    464,206
    
    
    
    2
    %Daqing
    
    
    13,231
    
    
    
    18,096
    
    
    
    -27
    %
    
    
    18,096
    
    
    
    19,379
    
    
    
    -7
    %465,804
    
    
    
    489,913
    
    
    
    -5
    %
    
    
    489,913
    
    
    
    483,585
    
    
    
    1
    %
 
    
    Production Volumes 2009 vs. 2008
  
    
    Production Volumes 2008 vs. 2007
   31




---



##### Table of Contents




    
    Operating Costs 2009 vs. 2008
  PRC Windfall Levy Measures Windfall Levy
  
    
    Operating Costs 2008 vs. 2007
    Year ended December 31,2009
    
    
    2008
    
    
    2007Net Production:Boe
    
    
    465,804
    
    
    
    489,913
    
    
    
    483,585Boe/day for the period
    
    
    1,276
    
    
    
    1,339
    
    
    
    1,325
 Per BoeOil and gas revenue
    
    $
    53.60
    
    
    $
    98.73
    
    
    $
    64.86Field operating costs
    
    
    17.02
    
    
    
    21.70
    
    
    
    18.08Windfall Levy
    
    
    4.00
    
    
    
    21.14
    
    
    
    7.68Engineering and support costs
    
    
    0.86
    
    
    
    1.08
    
    
    
    1.1221.88
    
    
    
    43.92
    
    
    
    26.88Net operating revenue
    
    
    31.72
    
    
    
    54.81
    
    
    
    37.98Depletion
    
    
    38.70
    
    
    
    47.22
    
    
    
    39.73Net revenue (loss) from operations
    
    $
    (6.98
    )
    
    $
    7.59
    
    
    $
    (1.75
    )
  32




---



##### Table of Contents



General and Administrative
  2009 vs.
    
    
    2008 vs.2008
    
    
    2007Favorable (unfavorable) variances:Oil Activities:Canada
    
    $
    498
    
    
    $
    (1,627
    )Ecuador
    
    
    (1,611
    )
    
    
    (658
    )Asia
    
    
    (810
    )
    
    
    (141
    )Corporate
    
    
    (5,518
    )
    
    
    (2,023
    )(7,441
    )
    
    
    (4,449
    )Less: stock based compensation
    
    
    1,243
    
    
    
    322$
    (6,198
    )
    
    $
    (4,127
    )
 
    
    General and Administrative 2009 vs. 2008Canada
  Ecuador
  Asia
  Corporate
  
    
    General and Administrative 2008 vs. 2007Canada
  Ecuador
   33




---



##### Table of Contents



Asia
  Corporate
  
 Business and Technology Development
  
    
    Business and Technology Development 2009 vs. 2008
  
    
    Business and Technology Development 2007 vs. 2006
 TM
 
 Foreign Exchange Loss
  
 Net Interest
 
    
    Net Interest 2009 vs. 2008
  
    
    Net Interest 2008 vs. 2007
  
 Unrealized Gain (Loss) on Derivative Instruments
   34




---



##### Table of Contents



Year Ended


    Favorable
    
    
    Year Ended
    
    
    Favorable
    
    
    Year EndedDecember 31,


    (Unfavorable)
    
    
    December 31,
    
    
    (Unfavorable)
    
    
    December 31,2009


    Variances
    
    
    2008
    
    
    Variances
    
    
    2007$
    (1,459

)
    $
    (7,577
    )
    
    $
    6,118
    
    
    $
    10,777
    
    
    $
    (4,659
    )
 
 Depletion and Depreciation
  
    
    Depletion and Depreciation 2009 vs. 2008Asia
  Business and Technology Development
  
    
    Depletion and Depreciation 2008 vs. 2007Asia
  Business and Technology Development
  
 Provision for Impairment of Intangible Asset and Development Costs
   35




---



##### Table of Contents



Write-off of Deferred Financing Costs
  
 Provision for Impairment of Oil and Gas Properties
  
    
    Impairment of Oil and Gas Properties 2008 vs. 2007
  Provision for/Recovery of Income Taxes
 Asia
  Business and Technology Development
  
 Net Income (Loss) from Discontinued Operations
   36




---



##### Table of Contents



Year Ended December 31,2009
    
    
    2008
    
    
    2007RevenueOil and gas revenue
    
    $
    5,455
    
    
    $
    18,120
    
    
    $
    12,270Gain (loss) on derivative instruments
    
    
    189
    
    
    
    278
    
    
    
    (5,594
    )Interest income
    
    
    8
    
    
    
    98
    
    
    
    1525,652
    
    
    
    18,496
    
    
    
    6,828ExpensesOperating costs
    
    
    2,132
    
    
    
    5,137
    
    
    
    4,319General and administrative
    
    
    139
    
    
    
    2,413
    
    
    
    1,972Depletion and depreciation
    
    
    3,772
    
    
    
    6,143
    
    
    
    5,884Interest expense and financing costs
    
    
    173
    
    
    
    520
    
    
    
    4276,216
    
    
    
    14,213
    
    
    
    12,602Income (Loss) before disposition
    
    
    (564
    )
    
    
    4,283
    
    
    
    (5,774
    )Loss on disposition (net of tax of $29.6 million
for 2009, nil for 2008 and 2007)
    
    
    (23,357
    )
    
    
    
    
    
    
    Net Income (Loss) from discontinued operations
    
    $
    (23,921
    )
    
    $
    4,283
    
    
    $
    (5,774
    )
 
    
    Revenues and Operating CostsPrices and gain/loss on derivatives
   Production Volumes
  Operating Costs
    37




---



##### Table of Contents




    
    General and Administrative Expenses
   
    
    Net Interest
  
    
    Unrealized Gain (Loss) on Derivative Instruments
   
    
    Depletion and Depreciation
  
 Financial Condition, Liquidity and Capital Resources
 
 Sources and Uses of Cash
  Year ended December 31,2009
    
    
    2008
    
    
    2007Net cash provided by (used in) operating activities
    
    $
    (12,290
    )
    
    $
    17,053
    
    
    $
    5,489Net cash provided by (used in) investing activities
    
    $
    6,396
    
    
    $
    (49,321
    )
    
    $
    (22,287
    )Net cash provided by (used in) financing activities
    
    $
    (11,875
    )
    
    $
    70,751
    
    
    $
    14,275Net increase in cash and cash equivalents
    
    $
    (17,753
    )
    
    $
    27,909
    
    
    $
    (2,523
    )
   38




---



##### Table of Contents




    
    Inability to attract strategic investors to our projects,
    
    Volatility in the public debt and private and equity markets,
    
    Increases in interest rates or credit spreads, as well as limitations on the
availability of credit, that affect our ability to borrow under future potential credit
facilities on a secured or unsecured basis, and
    
    A decrease in the market price for our common stock.
    
    Operating Activities
  
    
    Investing Activities
   For the Year Ended
    
    
    For the Year EndedDecember 31,
    
    
    December 31,(Increase)
    
    
    
    
    
    
    
    
    
    
    (Increase)2009
    
    
    2008
    
    
    Decrease
    
    
    2008
    
    
    2007
    
    
    DecreaseOil and Gas Activities:Canada
    
    $
    12,756
    
    
    $
    6,484
    
    
    $
    (6,272
    )
    
    $
    6,484
    
    
    $
    
    
    
    $
    (6,484
    )Ecuador
    
    
    5,380
    
    
    
    1,369
    
    
    
    (4,011
    )
    
    
    1,369
    
    
    
    
    
    
    
    (1,369
    )Asia
    
    
    6,049
    
    
    
    8,378
    
    
    
    2,329
    
    
    
    8,378
    
    
    
    23,488
    
    
    
    15,110Business and Technology Development
    
    
    2,093
    
    
    
    4,832
    
    
    
    2,739
    
    
    
    4,832
    
    
    
    5,097
    
    
    
    265Corporate
    
    
    95
    
    
    
    
    
    
    
    (95
    )
    
    
    
    
    
    
    
    
    
    
    $
    26,373
    
    
    $
    21,063
    
    
    $
    (5,310
    )
    
    $
    21,063
    
    
    $
    28,585
    
    
    $
    7,522
 Canada
  Ecuador
 TM
  39




---



##### Table of Contents



Asia
   Business and Technology Development
   Discontinued Operations
  
    
    Financing Activities
 Special Warrants Offering
     40




---



##### Table of Contents



Outlook for 2010
 TM
   
 Contractual Obligations and Commitments
  Payments Due by Year(stated in thousands of U.S. dollars)Total
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    After 2013Consolidated Balance Sheets:Long term debt
    
    $
    36,934
    
    
    $
    
    
    
    $
    36,934
    
    
    $
    
    
    
    $
    
    
    
    $
    Asset retirement obligation
    
    
    948
    
    
    
    753
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    195Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    Other Commitments:Interest payable
    
    
    3,535
    
    
    
    2,305
    
    
    
    1,230
    
    
    
    
    
    
    
    
    
    
    
    Lease commitments
    
    
    3,121
    
    
    
    1,448
    
    
    
    1,109
    
    
    
    438
    
    
    
    126
    
    
    
    Zitong exploration commitment
    
    
    20,830
    
    
    
    20,830
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nyalga exploration commitment
    
    
    3,350
    
    
    
    
    
    
    
    850
    
    
    
    500
    
    
    
    2,000
    
    
    
    Total
    
    $
    70,618
    
    
    $
    25,336
    
    
    $
    40,123
    
    
    $
    938
    
    
    $
    4,026
    
    
    $
    195
  
 Critical Accounting Principles and Estimates
    Full Cost Accounting CICA AcG 16
  41




---



##### Table of Contents



Oil and Gas Reserves
  
    
    determining whether or not an exploratory well has found economically recoverable
reserves. Such determinations involve the commitment of additional capital to develop the
field based on current estimates of production forecasts, prices and other economic
conditions.
    
    calculating our unit-of-production depletion rates. Proved reserves are used to
determine rates that are applied to each unit-of-production in calculating our depletion
expense.
    
    assessing our proved oil and gas properties for impairment on a quarterly basis.
Estimated future net cash flows used to assess impairment of our oil and gas properties are
determined using proved and probable reserves(1). See Impairment of Proved Oil
and Gas Properties below.
    (1)
    
    Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of
geoscience and engineering data, can be estimated with reasonable certainty to be economically
produciblefrom a given date forward, from known reservoirs, and under existing economic
conditions, operating methods, and government regulations.Probable reserves are those additional reserves that are less certain to be recovered than proved
reserves but which, together with proved reserves, are as likely as not to be recovered. Depletion 
   42




---



##### Table of Contents



Impairment of Proved Oil and Gas Properties 
 ceiling test (1)
 (1)
 (1)
    
    For Canadian GAAP, the carrying value includes all capitalized costs for each cost center,
including costs associated with asset retirement net of estimated salvage values, unproved
properties and major development projects, less accumulated depletion and ceiling test
impairments. This is essentially the same definition according to U.S. GAAP, under Regulation S-X,
except that the carrying value of assets should be net of deferred income taxes and costs of major
development projects are to be considered separately for purposes of the ceiling test calculation. Asset Retirement Obligations 
 FASB ASC SFAS
  43




---



##### Table of Contents



Research and Development  TM TM TM
 TM S.3064 TM
 TM
  Intangible Assets  TM TM TM TM TM
  
 2009 Accounting Changes
 CICA S.3064 S.3062
  44




---



##### Table of Contents



Impact of New and Pending Canadian GAAP Accounting Standards
 EIC
 AcSB S.1582
 S.1601 S.1602 S.1600
  45




---



##### Table of Contents



Convergence of Canadian GAAP with International Financial Reporting Standards
 Transition to International Financial Reporting Standards
 AcSB GAAP IFRS IASB
 IFRS Transition Overview
 SEC
  IFRS Conversion Plan
   Impact Assessment
    
    Selected Key Activities
    
    Milestones
    
    Progress to DateAccounting and
Financial Reporting
    
    Identification of IFRS
versus Canadian
GAAP differences
(impact assessment)

Design and implement
solutions

Evaluate and select
one-time and
ongoing accounting
policy alternatives
 Quantify the effects
of the conversion
to IFRS

Prepare mock financial
statements and
related note
disclosures to comply
with IFRS

Engage advisors to
assist with conversion
    
    Assessment and
quantification of
the
significant effects
of the conversion
will be complete by
Q3 2010

Final selection of
accounting policies
by Q1 2010 with on-going assessment
based on changes to
IFRS 
Complete mock IFRS
financial
statements by Q2
2010

Accumulation of
data to establish
opening balance
sheet adjustments
    
    Completed the
identification of
significant IFRS
differences (impact
assessment)

Selection of
one-time transition
choices is
substantially
complete
 Evaluation and
selection of
accounting policies
and alternatives
has commenced and
will continue to be
assessed up to the
date of transition

Identification and
quantification of
opening balance
sheet adjustments
have commenced

Advisors have
commenced
validation
of the Companys
technical
accounting analysis
and impacts
  46




---



##### Table of Contents



Impact Assessment
    
    Selected Key Activities
    
    Milestones
    
    Progress to DateProcess and Systems
    
    Assess impact of IFRS
accounting standards
on business activities

Identify and addresses
IFRS differences that
require changes to
financial systems

Identify and address
additional data
capture and reporting
requirements to
financial systems

Evaluate and select
methods to address
dual record keeping
during 2010 (IFRS and
Canadian GAAP), for
2010 IFRS comparatives
    
    Changes to systems
and development
of reporting to be
complete by Q3 2010

Data capture is
ongoing and
targeted for
completion during
the fourth quarter
of 2010

Method to address
dual record keeping
to be identified by
Q1 2010
    
    Project management
continues to
identify critical
path tasks,
resourcing matters
and impact to
processes

Commenced
identification of
data capture
requirements

Identification of
dual record-keeping
structure has
commencedTraining and
communication
    
    Provide training to
affected employees,
resources directly
involved in the
transition, senior
management and
Audit Committee

Communication of
progress of conversion
plan to internal and
external stakeholders
    
    Timely training
provided to align
with work under
transition 
training to be
substantially
completed by Q4
2010

Communicate effects
of the transition
during the course
of 2010
    
    Detailed training
for resources
directly engaged in
the transition has
commenced and will
be on-going

Communications to
senior management
and Audit Committee
have been scheduled

On-going
communication to
external
stakeholders though
MD&A disclosure


Periodic project
status updates will
be presented to
senior management
and Audit CommitteeInternal control
over financial
reporting and
disclosure controls
and procedures
    
    Revise existing
control processes and
procedures to address
significant changes to
existing accounting
policies

Assess effectiveness
    
    Complete design and
commence
implementation
during 2010 and Q1
2011

Assess process
changes throughout
2010

Update CEO/CFO
officer
certification
process for Q4 2010
    
    IFRS differences
with process
impacts have been
identified and
design of
significant process
changes has
commenced
  47




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##### Table of Contents



Impact of Adoption of IFRS
  IFRS 1: First-time Adoption of International Financial Reporting Standards (IFRS 1)
   Oil and Gas Assets
 IFRS 6 IAS 16 CGUs IAS 36
  Property Plant and Equipment (Non-Oil and Gas) and Intangible Assets
 IAS
38
   48




---



##### Table of Contents



TM IFRS 3
 Business Combinations
  CICA
 Decommissioning Liabilities (Asset Retirement Obligations)
 IFRIC
   Share Based Payments
 IFRS 2
   
 Impact of New and Pending U.S. GAAP Accounting Standards
   49




---



##### Table of Contents



Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities-a replacement of FASB Statement
No. 125, Accounting for Transfers of Financial Assets  An Amendment of
FASB Statement No. 140
  FSP
   50




---



##### Table of Contents



ASU ASU 09-05
 
 Off Balance Sheet Arrangements
   51




---



##### Table of Contents



Related Party Transactions
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  NON-TRADING
 Equity Market Risks
   Commodity Price Risk
    (1)
 (1)
    
    The recoverable value of probable reserves is included only for the measurement of the
impairment of the carrying value of oil and gas properties as required under Canadian GAAP but not
for U.S. GAAP. Additionally, there are differences for U.S. GAAP  see Critical Accounting
Principles and Estimates for the difference between Canadian and U.S. GAAP in calculating the
impairment provision for oil and gas properties.  52




---



##### Table of Contents



Foreign Currency Rate Risk
  Interest Rate Risk
  Credit Risk
     53




---



##### Table of Contents



Liquidity Risk
  TRADING
   54




---



##### Table of Contents



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Index to Financial Statements and Related Information
 PageReport of Independent Registered Chartered Accountants
    
    
    56Consolidated Financial StatementsConsolidated Balance Sheets
    
    
    57Consolidated Statements of Operations and Comprehensive Loss
    
    
    58Consolidated Statements of Shareholders Equity
    
    
    59Consolidated Statements of Cash Flows
    
    
    60Notes to the Consolidated Financial Statements
    
    
    61Quarterly Financial Data in Accordance with Canadian and U.S. GAAP (Unaudited)
    
    
    102Supplementary Disclosures About Oil and Gas Production Activities (Unaudited)
    
    
    102
  55




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
 Ivanhoe Energy Inc.:
    Internal ControlIntegrated Framework
  
  56




---



##### Table of Contents



IVANHOE ENERGY INC.
 
 Consolidated Balance Sheets
  As at December 31,2009
    
    
    2008(Note 19)AssetsCurrent Assets:Cash and cash equivalents (Note 12)
    
    $
    21,512
    
    
    $
    38,477Accounts receivable (Note 12)
    
    
    5,021
    
    
    
    3,802Note receivable (Note 12)
    
    
    225
    
    
    
    Prepaid and other current assets
    
    
    771
    
    
    
    637Restricted cash
    
    
    2,850
    
    
    
    850Derivative instruments (Note 12)
    
    
    
    
    
    
    1,459Assets of discontinued operations (Note 19)
    
    
    
    
    
    
    2,72730,379
    
    
    
    47,952Oil and gas properties and development costs, net (Note 3)
    
    
    158,392
    
    
    
    143,974Intangible assets  HTLTM technology (Note 4)
    
    
    92,153
    
    
    
    92,153Long term assets
    
    
    839
    
    
    
    152Assets of discontinued operations (Note 19)
    
    
    
    
    
    
    62,644$
    281,763
    
    
    $
    346,875Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable and accrued liabilities (Note 12)
    
    $
    10,779
    
    
    $
    9,219Income tax payable (Note 14)
    
    
    530
    
    
    
    650Debt  current portion (Notes 5 and 12)
    
    
    
    
    
    
    412Asset retirement obligations  current portion (Note 6)
    
    
    753
    
    
    
    Liabilities of discontinued operations  current portion (Note 19)
    
    
    
    
    
    
    6,07412,062
    
    
    
    16,355Long term debt (Note 5 and 12)
    
    
    36,934
    
    
    
    37,855Asset retirement obligations (Note 6)
    
    
    195
    
    
    
    1,928Long term obligation (Note 7)
    
    
    1,900
    
    
    
    1,900Future income tax liability (Note 14)
    
    
    22,643
    
    
    
    29,600Liabilities of discontinued operations (Note 19)
    
    
    
    
    
    
    1,81073,734
    
    
    
    89,448Commitments and contingencies (Note 7)Shareholders Equity:Share capital, issued 282,558,593 common shares
December 31, 2008 279,381,187 common shares
    
    
    422,322
    
    
    
    413,857Purchase warrants (Notes 8 and Note 18)
    
    
    19,427
    
    
    
    18,805Contributed surplus
    
    
    20,029
    
    
    
    16,862Convertible note (Note 8)
    
    
    2,086
    
    
    
    2,086Accumulated deficit
    
    
    (255,835
    )
    
    
    (194,183
    )208,029
    
    
    
    257,427$
    281,763
    
    
    $
    346,875
  Approved by the Board:
 (signed) Robert M. Friedland
    
    (signed) Brian F. DowneyDirector
    
    Director
  57




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Consolidated Statements of Operations and Comprehensive Loss
  Year Ended December 31,2009
    
    
    2008
    
    
    2007(Note 19)
    
    
    (Note 19)RevenueOil revenue
    
    $
    24,968
    
    
    $
    48,370
    
    
    $
    31,365Gain (loss) on derivative instruments
    
    
    (1,335
    )
    
    
    1,688
    
    
    
    (4,993
    )Interest income
    
    
    25
    
    
    
    612
    
    
    
    31723,658
    
    
    
    50,670
    
    
    
    26,689ExpensesOperating costs
    
    
    10,191
    
    
    
    21,515
    
    
    
    13,000General and administrative
    
    
    21,693
    
    
    
    14,252
    
    
    
    9,803Business and technology development
    
    
    9,501
    
    
    
    6,453
    
    
    
    9,625Depletion and depreciation
    
    
    19,868
    
    
    
    25,761
    
    
    
    20,640Foreign exchange loss
    
    
    5,220
    
    
    
    1,527
    
    
    
    301Interest expense and financing costs
    
    
    856
    
    
    
    1,309
    
    
    
    623Provision
for impairment of intangible asset and development costs (Notes 3 and 4)
    
    
    1,903
    
    
    
    15,054
    
    
    
    Write off of deferred financing costs (Note 13)
    
    
    
    
    
    
    2,621
    
    
    
    Provision for impairment of oil and gas properties (Note 3)
    
    
    
    
    
    
    
    
    
    
    6,13069,232
    
    
    
    88,492
    
    
    
    60,122Loss from continuing operations before income taxes
    
    
    (45,574
    )
    
    
    (37,822
    )
    
    
    (33,433
    )(Provision for) recovery of income taxesCurrent
    
    
    (1,757
    )
    
    
    (654
    )
    
    
    Future
    
    
    9,600
    
    
    
    
    
    
    
    7,843
    
    
    
    (654
    )
    
    
    Net loss from continuing operations
    
    
    (37,731
    )
    
    
    (38,476
    )
    
    
    (33,433
    )Net income (loss) from discontinued operations (net of tax
of $29.6 million for 2009, nil for 2008 and 2007) (Notes 13 and 14)
    
    
    (23,921
    )
    
    
    4,283
    
    
    
    (5,774
    )Net Loss and Comprehensive Loss
    
    $
    (61,652
    )
    
    $
    (34,193
    )
    
    $
    (39,207
    )Net loss per shareNet loss from continuing operations, basic and diluted
    
    $
    (0.13
    )
    
    $
    (0.15
    )
    
    $
    (0.14
    )Net income (loss) from discontinued operations, basic and diluted
    
    
    (0.09
    )
    
    
    0.02
    
    
    
    (0.02
    )Net loss per share, basic and diluted
    
    $
    (0.22
    )
    
    $
    (0.13
    )
    
    $
    (0.16
    )Weighted average number of Shares (in thousands)Basic and Diluted
    
    
    279,722
    
    
    
    258,815
    
    
    
    242,362
   58




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Consolidated
Statements of Shareholders Equity
  Share Capital
    
    
    Purchase
    
    
    Contributed
    
    
    Convertible
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Warrants
    
    
    Surplus
    
    
    Note
    
    
    Deficit
    
    
    Total(thousands)Balance December 31, 2006
    
    
    241,216
    
    
    
    318,725
    
    
    
    23,955
    
    
    
    6,489
    
    
    
    
    
    
    
    (120,783
    )
    
    
    228,386Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,207
    )
    
    
    (39,207
    )Shares issued for:Exercise of purchase warrants (Note 8)
    
    
    2,000
    
    
    
    4,313
    
    
    
    (313
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Exercise of options (Note 9)
    
    
    1,231
    
    
    
    431
    
    
    
    
    
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    379Employee bonuses
    
    
    427
    
    
    
    793
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    793Expiry of purchase warrants (Note 8)
    
    
    
    
    
    
    
    
    
    
    (564
    )
    
    
    564
    
    
    
    
    
    
    
    
    
    
    
    Compensation calculated
for stock option grants (Note 9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,936
    
    
    
    
    
    
    
    
    
    
    
    2,936Balance December 31, 2007
    
    
    244,874
    
    
    
    324,262
    
    
    
    23,078
    
    
    
    9,937
    
    
    
    
    
    
    
    (159,990
    )
    
    
    197,287Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,193
    )
    
    
    (34,193
    )Shares issued for:Private placements,
net of share issue costs (Note 8)
    
    
    29,334
    
    
    
    82,451
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,451Exercise of convertible debt (Note 8)
    
    
    2,291
    
    
    
    4,862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,862Exercise of options (Note 9)
    
    
    2,666
    
    
    
    1,792
    
    
    
    
    
    
    
    (587
    )
    
    
    
    
    
    
    
    
    
    
    1,205Employee bonuses
    
    
    216
    
    
    
    490
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    490Convertible note issued (Note 8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,086
    
    
    
    
    
    
    
    2,086Expiry of purchase warrants (Note 8)
    
    
    
    
    
    
    
    
    
    
    (4,273
    )
    
    
    4,273
    
    
    
    
    
    
    
    
    
    
    
    Compensation calculated
for stock option grants (Note 9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,239
    
    
    
    
    
    
    
    
    
    
    
    3,239Balance December 31, 2008
    
    
    279,381
    
    
    
    413,857
    
    
    
    18,805
    
    
    
    16,862
    
    
    
    2,086
    
    
    
    (194,183
    )
    
    
    257,427Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61,652
    )
    
    
    (61,652
    )Shares issued for:Acquisition of a business (Note 18)
    
    
    2,683
    
    
    
    6,874
    
    
    
    622
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,496Services
    
    
    81
    
    
    
    207
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207Exercise of options (Note 9)
    
    
    414
    
    
    
    1,384
    
    
    
    
    
    
    
    (492
    )
    
    
    
    
    
    
    
    
    
    
    892Compensation calculated
for stock option grants (Note 9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,659
    
    
    
    
    
    
    
    
    
    
    
    3,659Balance December 31, 2009
    
    
    282,559
    
    
    $
    422,322
    
    
    $
    19,427
    
    
    $
    20,029
    
    
    $
    2,086
    
    
    $
    (255,835
    )
    
    $
    208,029
   59




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Consolidated Statements of Cash Flows
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Operating ActivitiesNet loss
    
    $
    (61,652
    )
    
    $
    (34,193
    )
    
    $
    (39,207
    )Net (income) loss from discontinued operations
    
    
    23,921
    
    
    
    (4,283
    )
    
    
    5,774Items not requiring use of cash:Depletion and depreciation
    
    
    19,868
    
    
    
    25,761
    
    
    
    20,640Provision for impairment
    
    
    1,903
    
    
    
    15,054
    
    
    
    6,130Stock based compensation (Note 9)
    
    
    3,849
    
    
    
    3,016
    
    
    
    3,151Unrealized (gain) loss on derivative instruments
    
    
    1,459
    
    
    
    (6,118
    )
    
    
    4,659Write off of deferred financing costs (Note 13)
    
    
    
    
    
    
    2,621
    
    
    
    Unrealized foreign exchange loss
    
    
    5,109
    
    
    
    1,762
    
    
    
    Future income tax recovery
    
    
    (9,600
    )
    
    
    
    
    
    
    Provision for uncollectible accounts
    
    
    174
    
    
    
    625
    
    
    
    Other
    
    
    553
    
    
    
    519
    
    
    
    381Abandonment costs settled (Note 6)
    
    
    (118
    )
    
    
    
    
    
    
    Changes in non-cash working capital items
    
    
    (459
    )
    
    
    6,016
    
    
    
    (360
    )Net cash provided by (used in)
operating activities from continuing operations
    
    
    (14,993
    )
    
    
    10,780
    
    
    
    1,168Net cash provided by (used in)
operating activities from discontinued operations
    
    
    2,703
    
    
    
    6,273
    
    
    
    4,321Net cash provided by (used in) operating activities
    
    
    (12,290
    )
    
    
    17,053
    
    
    
    5,489Investing ActivitiesCapital investments
    
    
    (26,373
    )
    
    
    (21,063
    )
    
    
    (28,585
    )Acquisition of oil and gas assets
    
    
    
    
    
    
    (22,308
    )
    
    
    Recovery of development costs (Note 3)
    
    
    
    
    
    
    
    
    
    
    9,000Advance repayments
    
    
    
    
    
    
    200
    
    
    
    500Increase in restricted cash in escrow
    
    
    (2,000
    )
    
    
    (850
    )
    
    
    Other
    
    
    (587
    )
    
    
    73
    
    
    
    (47
    )Changes in non-cash working capital items
    
    
    64
    
    
    
    (1,035
    )
    
    
    (1,283
    )Net cash used in investing activities from continuing operations
    
    
    (28,896
    )
    
    
    (44,983
    )
    
    
    (20,415
    )Net cash provided by (used in)
investing activities from discontinued operations
    
    
    35,292
    
    
    
    (4,338
    )
    
    
    (1,872
    )Net cash provided by (used in) investing activities
    
    
    6,396
    
    
    
    (49,321
    )
    
    
    (22,287
    )Financing ActivitiesShares issued on private placements, net of share issue costs
    
    
    
    
    
    
    82,451
    
    
    
    Share issue costs on acquisition
    
    
    (26
    )
    
    
    
    
    
    
    Proceeds from exercise of options and warrants
    
    
    893
    
    
    
    1,205
    
    
    
    4,379Proceeds from debt obligations, net of financing costs
    
    
    
    
    
    
    4,790
    
    
    
    9,356Payments of debt obligations
    
    
    (7,416
    )
    
    
    (15,750
    )
    
    
    (2,460
    )Payments of deferred financing costs
    
    
    
    
    
    
    (2,621
    )
    
    
    Other
    
    
    (100
    )
    
    
    (50
    )
    
    
    Changes in non-cash working capital items
    
    
    (26
    )
    
    
    26
    
    
    
    Net cash provided by (used in)
financing activities from continuing operations
    
    
    (6,675
    )
    
    
    70,051
    
    
    
    11,275Net cash provided by (used in)
financing activities from discontinued operations
    
    
    (5,200
    )
    
    
    700
    
    
    
    3,000Net cash provided by (used in) financing activities
    
    
    (11,875
    )
    
    
    70,751
    
    
    
    14,275Foreign Exchange gain (loss) on Cash and Cash
Equivalents Held in a Foreign Currency
    
    
    16
    
    
    
    (10,574
    )
    
    
    Increase in Cash and Cash Equivalents, for the period
    
    
    (17,753
    )
    
    
    27,909
    
    
    
    (2,523
    )Cash and cash equivalents, beginning of period
    
    
    39,265
    
    
    
    11,356
    
    
    
    13,879Cash and Cash Equivalents, end of period
    
    $
    21,512
    
    
    $
    39,265
    
    
    $
    11,356Cash and cash equivalents, end of period  continuing operations
    
    $
    21,512
    
    
    $
    38,477
    
    
    $
    9,060Cash and cash equivalents, end of period  discontinued operations
    
    $
    
    
    
    $
    788
    
    
    $
    2,296
   60




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Notes to the Consolidated Financial Statements
(all tabular amounts are expressed in thousands of U.S. Dollars, except share and per share amounts)
 1. NATURE OF OPERATIONS
 Company Ivanhoe Energy RTP TM Process HTL TM Technology HTL TM  EOR E&P
 2. SIGNIFICANT ACCOUNTING POLICIES
 GAAP
   Basis of Presentation
  Principles of Consolidation
     61




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##### Table of Contents



Foreign Currency Translation
  Cash and Cash Equivalents
  Oil and Gas Properties
 Full Cost Accounting
  Depletion
  Impairment of Proved Oil and Gas Properties
   62




---



##### Table of Contents



Asset Retirement Costs
 TM
   Development Costs
 TM MOU TM
 TM TM CDF TM FTF TM
 TM
 TM
 Furniture and Equipment
  Intangible Assets
   63




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##### Table of Contents



TM Syntroleum GTL
Technology GTL TM TM TM TM TM
 Oil and Gas Revenue
   Earnings or Loss Per Share
  Income Taxes
  Stock Based Compensation
     64




---



##### Table of Contents



Financial Assets and Liabilities
 Financial assets
     Financial liabilities
       Derivative Financial Instruments
     65




---



##### Table of Contents



2009 Accounting Changes
 CICA S.3064 S.3062
   EIC
 AcSB
 Impact of New and Pending Canadian GAAP Accounting Standards
 S.1582
 S.1601 S.1602 S.1600
  66




---



##### Table of Contents



3. OIL AND GAS PROPERTIES AND DEVELOPMENT COSTS
  As at December 31, 2009Oil and Gas
    
    
    
    
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    
    
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    Corporate
    
    
    Development
    
    
    TotalOil and Gas Properties:Proved
    
    $
    
    
    
    $
    
    
    
    $
    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 Costs:Feasibility studies and other deferred costs:Iraq and Libya  HTLTM
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    834
    
    
    
    834Egypt  GTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    5,054Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,888
    )
    
    
    (5,888
    )Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,868
    
    
    
    10,868Accumulated depreciation and impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (393
    )
    
    
    (393
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,475
    
    
    
    10,475Furniture and equipment
    
    
    24
    
    
    
    169
    
    
    
    135
    
    
    
    968
    
    
    
    22
    
    
    
    1,318Accumulated depreciation
    
    
    (8
    )
    
    
    (53
    )
    
    
    (92
    )
    
    
    (650
    )
    
    
    (11
    )
    
    
    (814
    )16
    
    
    
    116
    
    
    
    43
    
    
    
    318
    
    
    
    11
    
    
    
    504$
    94,447
    
    
    $
    6,871
    
    
    $
    46,270
    
    
    $
    318
    
    
    $
    10,486
    
    
    $
    158,392
 As at December 31, 2008Oil and Gas
    
    
    
    
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    
    
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    Corporate
    
    
    Development
    
    
    TotalOil and Gas Properties:Proved
    
    $
    
    
    
    $
    
    
    
    $
    141,089
    
    
    $
    
    
    
    $
    
    
    
    $
    141,089Unproved
    
    
    81,090
    
    
    
    1,454
    
    
    
    5,233
    
    
    
    
    
    
    
    
    
    
    
    87,77781,090
    
    
    
    1,454
    
    
    
    146,322
    
    
    
    
    
    
    
    
    
    
    
    228,866Accumulated depletion
    
    
    
    
    
    
    
    
    
    
    (81,717
    )
    
    
    
    
    
    
    
    
    
    
    (81,717
    )Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    (16,550
    )
    
    
    
    
    
    
    
    
    
    
    (16,550
    )81,090
    
    
    
    1,454
    
    
    
    48,055
    
    
    
    
    
    
    
    
    
    
    
    130,599Development Costs:Feasibility studies and other deferred costs:Iraq and Libya  HTLTM
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    801
    
    
    
    801Egypt  GTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    5,054Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,054
    )
    
    
    (5,054
    )Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,770
    
    
    
    8,770Commercial demonstration facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,036
    
    
    
    11,036Accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,713
    )
    
    
    (7,713
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,894
    
    
    
    12,894Furniture and equipment
    
    
    20
    
    
    
    90
    
    
    
    120
    
    
    
    13
    
    
    
    406
    
    
    
    649Accumulated depreciation
    
    
    (6
    )
    
    
    
    
    
    
    (79
    )
    
    
    (6
    )
    
    
    (77
    )
    
    
    (168
    )14
    
    
    
    90
    
    
    
    41
    
    
    
    7
    
    
    
    329
    
    
    
    481$
    81,104
    
    
    $
    1,544
    
    
    $
    48,096
    
    
    $
    7
    
    
    $
    13,223
    
    
    $
    143,974
  67




---



##### Table of Contents



Oil and Gas Properties
     As at December 31,2009
    
    
    2008
    
    
    2007(per Bbl)
    
    
    (per Bbl)
    
    
    (per Bbl)2008
    
    NA
    
    
    NA
    
    
    $
    92.002009
    
    NA
    
    
    $
    57.50
    
    
    $
    88.002010
    
    $
    80.00
    
    
    $
    68.00
    
    
    $
    84.002011
    
    $
    83.00
    
    
    $
    74.00
    
    
    $
    82.002012
    
    $
    86.00
    
    
    $
    85.00
    
    
    $
    82.002013
    
    $
    89.00
    
    
    $
    92.01
    
    
    $
    82.002014
    
    $
    92.00
    
    
    $
    93.85
    
    
    $
    82.002015
    
    $
    93.84
    
    
    $
    95.73
    
    
    $
    82.002016
    
    $
    95.72
    
    
    $
    97.64
    
    
    $
    82.022017
    
    $
    97.64
    
    
    $
    99.59
    
    
    $
    83.662018
    
    $
    99.59
    
    
    
    101.59
    
    
    2% per year2019
    
    $
    101.58
    
    
    2% per year
    
    2% per yearThereafter
    
    2% per year
    
    2% per year
    
    2% per year
 Development Costs
 Feasibility Studies and Other Deferred Costs
  TM TM
 HTLTMFacilities
   68




---



##### Table of Contents



4. INTANGIBLE ASSETS  TECHNOLOGY
  HTL TM Technology
 Ensyn TM TM TM TM TM
 Syntroleum GTL Master License
  TM
 5. LONG TERM DEBT
  December 31,
    
    
    December 31,2009
    
    
    2008Variable rate bank note (4.00% at December 31, 2009) paid in full December 2009
    
    $
    
    
    
    $
    7,000Non-interest bearing promissory note, final payment February 2009
    
    
    
    
    
    
    416Convertible note (4.25% at December 31, 2009) due July 2011
    
    
    38,005
    
    
    
    32,78738,005
    
    
    
    40,203Less:Unamortized discount
    
    
    (1,071
    )
    
    
    (4
    )Unamortized deferred financing costs
    
    
    
    
    
    
    (1,932
    )Current maturities
    
    
    
    
    
    
    (412
    )(1,071
    )
    
    
    (2,348
    )$
    36,934
    
    
    $
    37,855
 Bank Loan
   69




---



##### Table of Contents



Promissory Note
 2008 Note Talisman
 Convertible Note
 Convertible Note
    2010
    
    $
    2011
    
    
    38,005$
    38,005
   70




---



##### Table of Contents



6. ASSET RETIREMENT OBLIGATIONS
  As at
    
    
    As atDecember 31,
    
    
    December 31,2009
    
    
    2008Carrying balance, beginning of year
    
    $
    1,928
    
    
    $
    739Liabilities incurred
    
    
    185
    
    
    
    Liabilities settled
    
    
    (118
    )
    
    
    Accretion expense
    
    
    79
    
    
    
    76Revisions in estimated cash flows
    
    
    (1,126
    )
    
    
    1,113Carrying balance, end of period
    
    
    948
    
    
    
    1,928Less: current portion
    
    
    753
    
    
    
    Carrying balance, end of year
    
    $
    195
    
    
    $
    1,928
 7. COMMITMENTS AND CONTINGENCIES
 Zitong Block Exploration Commitment
 CNPC Mitsubishi
 Phase I Zitong Partners Phase II
  Nyalga Block Exploration Commitment
 (the MRPAM)
  71




---



##### Table of Contents



Long Term Obligation
 TM
 Income Taxes
  Pan-China
   Other Commitments
    Lease Commitments
   72




---



##### Table of Contents



2010
    
    $
    1,4482011
    
    
    1,1092012
    
    
    4382013
    
    
    126Thereafter
    
    
    $
    3,121
 8. SHARE CAPITAL AND WARRANTS
  Special Warrants Offering
  Offering
 Convertible Notes
    73




---



##### Table of Contents



Purchase Warrants
  Purchase
    
    
    SharesWarrants
    
    
    Issuable(thousands)Balance December 31, 2006
    
    
    29,696
    
    
    
    29,696Purchase warrants exercised
    
    
    (2,000
    )
    
    
    (2,000
    )Purchase warrants expired
    
    
    (1,200
    )
    
    
    (1,200
    )Balance December 31, 2007
    
    
    26,496
    
    
    
    26,496Purchase warrants expired
    
    
    (15,096
    )
    
    
    (15,096
    )Private placements
    
    
    29,334
    
    
    
    29,334Purchase warrants exercised
    
    
    (29,334
    )
    
    
    (29,334
    )Balance December 31, 2008
    
    
    11,400
    
    
    
    11,400Exchanged as part of acquistion
    
    
    735
    
    
    
    735Balance December 31, 2009
    
    
    12,135
    
    
    
    12,135
     Purchase WarrantsPrice per
    
    
    
    
    
    
    
    
    
    
    Common
    
    
    
    
    
    
    
    
    
    
    Exercise
    
    
    CashSpecial
    
    
    
    
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    
    
    
    
    Price per
    
    
    Value onYear of Issue
    
    Warrant
    
    
    Issued
    
    
    Exercisable
    
    
    Issuable
    
    
    Value
    
    
    Expiry Date
    
    
    Share
    
    
    Exercise(thousands)
    
    
    ($U.S. 000)
    
    
    
    
    
    
    
    
    
    
    ($U.S. 000)2006
    
    
    U.S.$2.23
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    18,805
    
    
    May 2011
    
    Cdn. $2.93 (1)
    
    
    31,7362009
    
    NA
    
    
    735
    
    
    
    735
    
    
    
    735
    
    
    
    622
    
    
    February 2011
    
    Cdn. $4.05
    
    
    2,82812,135
    
    
    
    12,135
    
    
    
    12,135
    
    
    $
    19,427
    
    
    
    
    
    
    
    
    
    
    $
    34,564
 (1)
    
    Each common share purchase warrant originally entitled the holder to purchase one common
share at a price of $2.63 per share until the fifth anniversary date of the closing. In September
2006, these warrants were listed on the Toronto Stock Exchange and the exercise price was changed to Cdn.$2.93.   9. STOCK BASED COMPENSATION
    74




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##### Table of Contents



2009
    
    
    2008
    
    
    2007Expected term (in years)
    
    
    4.6
    
    
    
    4.0
    
    
    
    3.7Volatility
    
    
    81.1
    %
    
    
    63.5
    %
    
    
    73.5
    %Dividend Yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Risk-free rate
    
    
    2.6
    %
    
    
    3.1
    %
    
    
    4.1
    %
    2009
    
    
    2008
    
    
    2007General and Administrative Expense:Option awards
    
    $
    3,484
    
    
    $
    2,241
    
    
    $
    1,786Share bonus awards
    
    
    
    
    
    
    207
    
    
    
    340Shares issued for services
    
    
    207
    
    
    
    
    
    
    
    3,691
    
    
    
    2,448
    
    
    
    2,126Business and Technology Development Expense:Option awards
    
    
    158
    
    
    
    432
    
    
    
    774Share bonus awards
    
    
    
    
    
    
    136
    
    
    
    251158
    
    
    
    568
    
    
    
    1,025Discontinued Operations:Option awards
    
    
    17
    
    
    
    391
    
    
    
    376Share bonus awards
    
    
    
    
    
    
    147
    
    
    
    20217
    
    
    
    538
    
    
    
    578$
    3,866
    
    
    $
    3,554
    
    
    $
    3,729
   75




---



##### Table of Contents



December 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007Weighted-
    
    
    
    
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Number
    
    
    Average
    
    
    Number
    
    
    Average
    
    
    Number
    
    
    Averageof Stock
    
    
    Exercise
    
    
    of Stock
    
    
    Exercise
    
    
    of Stock
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    Price(thousands)
    
    
    (Cdn.$)
    
    
    (thousands)
    
    
    (Cdn.$)
    
    
    (thousands)
    
    
    (Cdn.$)Outstanding at beginning of year
    
    
    11,913
    
    
    $
    2.32
    
    
    
    12,945
    
    
    $
    2.37
    
    
    
    12,370
    
    
    $
    2.34Granted
    
    
    4,188
    
    
    $
    2.17
    
    
    
    3,832
    
    
    $
    1.79
    
    
    
    3,843
    
    
    $
    1.05Exercised
    
    
    (413
    )
    
    $
    2.46
    
    
    
    (3,067
    )
    
    $
    0.90
    
    
    
    (1,477
    )
    
    $
    0.62Expired
    
    
    (114
    )
    
    $
    2.44
    
    
    
    (580
    )
    
    $
    5.78
    
    
    
    (1,017
    )
    
    $
    3.12Forfeited
    
    
    (561
    )
    
    $
    2.41
    
    
    
    (1,217
    )
    
    $
    3.05
    
    
    
    (774
    )
    
    $
    2.69Outstanding at end of year
    
    
    15,013
    
    
    $
    2.27
    
    
    
    11,913
    
    
    $
    2.32
    
    
    
    12,945
    
    
    $
    2.37Options exercisable at end of year
    
    
    7,101
    
    
    $
    2.48
    
    
    
    5,062
    
    
    $
    2.61
    
    
    
    6,932
    
    
    $
    2.24
   Stock Options Outstanding
    
    
    Stock Options ExercisableWeighted-Average
    
    
    
    
    
    
    
    
    
    
    Weighted-AverageRange of
    
    Number
    
    
    Remaining
    
    
    Weighted-Average
    
    
    Number
    
    
    Remaining
    
    
    Weighted-AverageExercise Prices
    
    Outstanding
    
    
    Contractual Life
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Contractual Life
    
    
    Exercise Price(Cdn.$)
    
    (thousands)
    
    
    (Years)
    
    
    (Cdn.$)
    
    
    (thousands)
    
    
    (Years)
    
    
    (Cdn.$)$1.52 to $2.25
    
    
    9,652
    
    
    
    3.8
    
    
    $
    1.93
    
    
    
    2,612
    
    
    
    3.3
    
    
    $
    1.85$2.29 to $3.44
    
    
    5,089
    
    
    
    2.3
    
    
    $
    2.85
    
    
    
    3,906
    
    
    
    1.1
    
    
    $
    2.89$3.53 to $3.62
    
    
    272
    
    
    
    1.9
    
    
    $
    3.56
    
    
    
    235
    
    
    
    0.8
    
    
    $
    3.56$1.52 to $3.62
    
    
    15,013
    
    
    
    3.1
    
    
    $
    2.27
    
    
    
    6,753
    
    
    
    2.0
    
    
    $
    2.51
  Weighted-Number
    
    
    Averageof Stock
    
    
    Grant DateOptions
    
    
    Fair Value(thousands)
    
    
    (Cdn.$)Outstanding at December 31, 2008
    
    
    6,851
    
    
    $
    0.98Granted
    
    
    4,188
    
    
    $
    1.62Vested
    
    
    (2,814
    )
    
    $
    0.46Cancelled/forfeited
    
    
    (313
    )
    
    $
    0.02Outstanding at December 31, 2009
    
    
    7,912
    
    
    $
    1.21
 Unvested options outstanding at December 31, 2009 by type:
 Based on fulfilling service conditions
    
    
    6,926Based on fulfilling performance conditions
    
    
    9867,912
   76




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##### Table of Contents



10. RETIREMENT PLAN
 401(k) Plan
 11. SEGMENT INFORMATION
  Oil and Gas
 Integrated
 TM
 Conventional
  Business and Technology Development
   Corporate
 ,
  77




---



##### Table of Contents



Year Ended December 31, 2009Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil revenue
    
    $
    
    
    
    $
    
    
    
    $
    24,968
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    24,968Loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    (1,335
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,335
    )Interest income
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    25
    
    
    
    
    
    
    
    23,639
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    23,658ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    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 loss
    
    
    (8
    )
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    2
    
    
    
    5,155
    
    
    
    5,220Interest expense and financing costs
    
    
    
    
    
    
    
    
    
    
    770
    
    
    
    
    
    
    
    79
    
    
    
    7
    
    
    
    856Provision for impairment of
development costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,903
    
    
    
    
    
    
    
    1,9031,685
    
    
    
    2,322
    
    
    
    31,842
    
    
    
    
    
    
    
    12,558
    
    
    
    20,825
    
    
    
    69,232Loss from 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 from
continuing operations
    
    
    (1,685
    )
    
    
    (2,322
    )
    
    
    (9,602
    )
    
    
    
    
    
    
    (2,958
    )
    
    
    (21,164
    )
    
    
    (37,731
    )Net loss from discontinued
operations (net of tax of
$29.6 million)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,921
    )
    
    
    
    
    
    
    
    
    
    
    (23,921
    )Net income (loss) and
comprehensive income (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
  78




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##### Table of Contents



Year Ended December 31, 2008Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil revenue
    
    $
    
    
    
    $
    
    
    
    $
    48,370
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    48,370Gain on derivative instruments
    
    
    
    
    
    
    
    
    
    
    1,688
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,688Interest income
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    562
    
    
    
    612
    
    
    
    
    
    
    
    50,108
    
    
    
    
    
    
    
    
    
    
    
    562
    
    
    
    50,670ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    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 loss
    
    
    26
    
    
    
    
    
    
    
    278
    
    
    
    
    
    
    
    
    
    
    
    1,223
    
    
    
    1,527Interest expense and financing costs
    
    
    
    
    
    
    
    
    
    
    821
    
    
    
    
    
    
    
    76
    
    
    
    412
    
    
    
    1,309Provion 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 from 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 from
continuing operations
    
    
    (1,845
    )
    
    
    (658
    )
    
    
    (879
    )
    
    
    
    
    
    
    (24,014
    )
    
    
    (11,080
    )
    
    
    (38,476
    )Net income from
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,283
    
    
    
    
    
    
    
    
    
    
    
    4,283Net Income (Loss) and
Comprehensive Income (Loss)
    
    $
    (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
  79




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##### Table of Contents



Year Ended December 31, 2007Oil and Gas
    
    
    Business andConventional
    
    
    TechnologyAsia
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil and gas revenue
    
    $
    31,365
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    31,365Loss on derivative instruments
    
    
    (4,993
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,993
    )Interest income
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    259
    
    
    
    31726,430
    
    
    
    
    
    
    
    
    
    
    
    259
    
    
    
    26,689ExpensesOperating costs
    
    
    13,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,000General and administrative
    
    
    1,826
    
    
    
    
    
    
    
    
    
    
    
    7,977
    
    
    
    9,803Business and technology development
    
    
    
    
    
    
    
    
    
    
    9,625
    
    
    
    
    
    
    
    9,625Depletion and depreciation
    
    
    19,222
    
    
    
    
    
    
    
    1,412
    
    
    
    6
    
    
    
    20,640Foreign exchange loss
    
    
    216
    
    
    
    
    
    
    
    
    
    
    
    85
    
    
    
    301Interest expense and financing costs
    
    
    281
    
    
    
    
    
    
    
    29
    
    
    
    313
    
    
    
    623Provision for impairment of
oil and gas properties
    
    
    6,130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,13040,675
    
    
    
    
    
    
    
    11,066
    
    
    
    8,381
    
    
    
    60,122Net loss from
continuing operations
    
    
    (14,245
    )
    
    
    
    
    
    
    (11,066
    )
    
    
    (8,122
    )
    
    
    (33,433
    )Net loss from
discontinued operations
    
    
    
    
    
    
    (5,774
    )
    
    
    
    
    
    
    
    
    
    
    (5,774
    )Net Loss and Comprehensive Loss
    
    $
    (14,245
    )
    
    $
    (5,774
    )
    
    $
    (11,066
    )
    
    $
    (8,122
    )
    
    $
    (39,207
    )Capital Investments
    
    $
    23,488
    
    
    $
    
    
    
    $
    5,097
    
    
    $
    
    
    
    $
    28,585
  80




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##### Table of Contents



12. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS
  As at December 31, 2009FinancialAvailable-for-
    
    
    
    
    
    
    liabilitiesLoans and
    
    
    sale financial
    
    
    Held-for-
    
    
    measured at
    
    
    Total carryingreceivables
    
    
    assets
    
    
    trading
    
    
    amortized cost
    
    
    amountFinancial Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    21,512
    
    
    $
    
    
    
    $
    21,512Accounts receivable
    
    
    5,021
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,021Note receivable
    
    
    225
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225Restricted cash
    
    
    
    
    
    
    
    
    
    
    2,850
    
    
    
    
    
    
    
    2,850Financial Liabilities:Accounts payable and accrued liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,779
    )
    
    
    (10,779
    )Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,934
    )
    
    
    (36,934
    )Long term obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,900
    )
    
    
    (1,900
    )$
    5,246
    
    
    $
    
    
    
    $
    24,362
    
    
    $
    (49,613
    )
    
    $
    (20,005
    )
 As at December 31, 2008FinancialAvailable-for-
    
    
    
    
    
    
    liabilitiesLoans and
    
    
    sale financial
    
    
    Held-for-
    
    
    measured at
    
    
    Total carryingreceivables
    
    
    assets
    
    
    trading
    
    
    amortized cost
    
    
    amountFinancial Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    38,477
    
    
    $
    
    
    
    $
    38,477Accounts receivable
    
    
    3,802
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,802Restricted cash
    
    
    
    
    
    
    
    
    
    
    850
    
    
    
    
    
    
    
    850Derivative instruments
    
    
    
    
    
    
    
    
    
    
    1,459
    
    
    
    
    
    
    
    1,459Financial Liabilities:Accounts payable and accrued liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,219
    )
    
    
    (9,219
    )Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,267
    )
    
    
    (38,267
    )Long term obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,900
    )
    
    
    (1,900
    )$
    3,802
    
    
    $
    
    
    
    $
    40,786
    
    
    $
    (49,386
    )
    
    $
    (4,798
    )
  Level 1:
 Level 2:
 Level 3:
  Financial Risk Factors
   81




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##### Table of Contents



Market Risk
  Commodity Price Risks
    2009
    
    
    2008
    
    
    2007Realized gains (losses) on derivative transactions
    
    $
    124
    
    
    $
    (4,430
    )
    
    $
    (334
    )Unrealized gains (losses) on derivative transactions
    
    
    (1,459
    )
    
    
    6,118
    
    
    
    (4,659
    )$
    (1,335
    )
    
    $
    1,688
    
    
    $
    (4,993
    )
   Foreign Currency Exchange Rate Risk
   82




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##### Table of Contents



Interest Rate Risk
  Credit Risk
   TM
 December 31,
    
    
    December 31,2009
    
    
    2008Accounts Receivable:Neither impaired nor past due
    
    $
    5,004
    
    
    $
    3,675Impaired (net of valuation allowance)
    
    
    
    
    
    
    Not impaired and past due in the following periods:within 30 days
    
    
    
    
    
    
    5731 to 60 days
    
    
    
    
    
    
    3761 to 90 days
    
    
    
    
    
    
    33over 90 days
    
    
    17
    
    
    
    $
    5,021
    
    
    $
    3,802
  Liquidity Risk
   83




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##### Table of Contents



As at December 31, 2009
    
    
    As at December 31, 2008Contractual Maturity
    
    
    Contractual Maturity(Nominal Cash Flows)
    
    
    (Nominal Cash Flows)Less than
    
    
    1 to 2
    
    
    2 to 5
    
    
    Over 5
    
    
    Less than
    
    
    1 to 2
    
    
    2 to 5
    
    
    Over 51 year
    
    
    years
    
    
    years
    
    
    years
    
    
    1 year
    
    
    years
    
    
    years
    
    
    yearsNon derivative financial liablities:Trade accounts payable
    
    $
    3,767
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,659
    
    
    $
    
    
    
    $
    
    
    
    $
    Accruals
    
    $
    7,012
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,560
    
    
    $
    
    
    
    $
    
    
    
    $
    Long term debt and interest
    
    $
    2,305
    
    
    $
    38,164
    
    
    $
    
    
    
    $
    
    
    
    $
    3,483
    
    
    $
    9,432
    
    
    $
    33,495
    
    
    $
    
 13. CAPITAL MANAGEMENT
       84




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##### Table of Contents



14. INCOME TAXES
  Year ended December 31,2009
    
    
    2008
    
    
    2007Tax benefit computed at the combined Canadian federal and
provincial statutory income tax rates
    
    $
    (13,217
    )
    
    $
    (11,158
    )
    
    $
    (10,739
    )Foreign net losses affected at lower income tax rates
    
    
    106
    
    
    
    4,562
    
    
    
    1,456Effect of change in foreign exchange rates
    
    
    (2,858
    )
    
    
    3,006
    
    
    
    (2,878
    )Expiry of tax loss carry-forwards
    
    
    911
    
    
    
    2,875
    
    
    
    2,440Tax credit carry-forward
    
    
    (350
    )
    
    
    
    
    
    
    Compensation not deductible
    
    
    1,456
    
    
    
    753
    
    
    
    844Financing costs not deductible
    
    
    
    
    
    
    695
    
    
    
    Net currency exchange losses not deductible
    
    
    1,501
    
    
    
    402
    
    
    
    Change in prior year estimate of tax loss carry-forwards
    
    
    3,941
    
    
    
    (59
    )
    
    
    422Realized derivative (gains)/losses not taxable/deductible
    
    
    334
    
    
    
    (422
    )
    
    
    Effect of change in effective income tax rates on future tax assets
    
    
    (4,453
    )
    
    
    (331
    )
    
    
    6,109Other permanent differences
    
    
    32
    
    
    
    (127
    )
    
    
    991(12,597
    )
    
    
    196
    
    
    
    (1,355
    )Change in valuation allowance
    
    
    4,754
    
    
    
    458
    
    
    
    1,355Provision for (recovery of) income taxes
    
    $
    (7,843
    )
    
    $
    654
    
    
    $
    
  As at December 31,2009
    
    
    2008Future Income Tax
    
    
    Future Income TaxAssets
    
    
    Liabilities
    
    
    Assets
    
    
    LiabilitiesOil and gas properties and investments
    
    $
    471
    
    
    $
    (1,124
    )
    
    $
    4,285
    
    
    $
    (1,582
    )Intangibles
    
    
    
    
    
    
    (30,354
    )
    
    
    
    
    
    
    (37,089
    )Tax loss carry-forwards
    
    
    37,583
    
    
    
    
    
    
    
    29,602
    
    
    
    Tax credit carry-forward
    
    
    350
    
    
    
    
    
    
    
    
    
    
    
    Valuation allowance
    
    
    (29,570
    )
    
    
    
    
    
    
    (24,816
    )
    
    
    $
    8,834
    
    
    $
    (31,478
    )
    
    $
    9,071
    
    
    $
    (38,671
    )
   Circular
   85




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##### Table of Contents



15. NET LOSS PER SHARE
  Year ended December 31,2008
    
    
    2007
    
    
    2006(thousands of shares)Stock options
    
    
    289
    
    
    
    1,374
    
    
    
    2,433Purchase warrants
    
    
    409
    
    
    
    
    
    
    
    Convertible debt
    
    
    13,166
    
    
    
    6,943
    
    
    
    13,864
    
    
    
    8,317
    
    
    
    2,433
  Year ended December 31,2008
    
    
    2007
    
    
    2006(thousands of shares)Stock options
    
    
    10,908
    
    
    
    9,944
    
    
    
    8,616Purchase warrants
    
    
    16,444
    
    
    
    16,399
    
    
    
    28,89827,352
    
    
    
    26,343
    
    
    
    37,514
 16. SUPPLEMENTAL CASH FLOW INFORMATION
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Cash paid during the period forIncome taxes
    
    $
    1,876
    
    
    $
    5
    
    
    $
    6Interest
    
    $
    2,122
    
    
    $
    1,120
    
    
    $
    238Investing and Financing activities, non-cashAcquisition of business/assets(see note 18)Shares issued
    
    $
    6,899
    
    
    $
    
    
    
    $
    Warrants issued
    
    
    622
    
    
    
    
    
    
    
    Debt issued
    
    
    
    
    
    
    52,052
    
    
    
    $
    7,521
    
    
    $
    52,052
    
    
    $
    Conversion of debt to sharesExtinguishment of debt
    
    $
    
    
    
    $
    4,737
    
    
    $
    Extinguishment of interest
    
    
    
    
    
    
    125
    
    
    
    $
    
    
    
    $
    4,862
    
    
    $
    Shares issued for bonuses and services
    
    $
    207
    
    
    $
    490
    
    
    $
    793Stock based compensation capitalized
    
    $
    
    
    
    $
    175
    
    
    $
    
  86




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##### Table of Contents



Year Ended December 31,2009
    
    
    2008
    
    
    2007Changes in non-cash working capital itemsOperating ActivitiesAccounts receivable
    
    $
    (1,253
    )
    
    $
    3,509
    
    
    $
    (1,281
    )Note receivable
    
    
    (225
    )
    
    
    
    
    
    
    Prepaid and other current assets
    
    
    (175
    )
    
    
    (48
    )
    
    
    69Accounts payable and accrued liabilities
    
    
    1,314
    
    
    
    1,905
    
    
    
    852Income tax payable
    
    
    (120
    )
    
    
    650
    
    
    
    (459
    )
    
    
    6,016
    
    
    
    (360
    )Investing ActivitiesAccounts receivable
    
    
    (140
    )
    
    
    7
    
    
    
    (250
    )Prepaid and other current assets
    
    
    41
    
    
    
    (70
    )
    
    
    86Accounts payable and accrued liabilities
    
    
    163
    
    
    
    (972
    )
    
    
    (1,119
    )64
    
    
    
    (1,035
    )
    
    
    (1,283
    )Financing ActivitiesAccounts payable and accrued liabilities
    
    
    (26
    )
    
    
    26
    
    
    
    $
    (421
    )
    
    $
    5,007
    
    
    $
    (1,643
    )
  17. RELATED PARTY TRANSACTIONS
  18. ACQUISTION AND PROJECT RELATED AGREEMENTS
 Mongolia
 PPI
  Purchase Consideration:2,683,291 shares of Ivanhoe at Cdn.$2.70 per share(1)
    
    $
    6,899735,449 warrants to purchase Ivanhoe shares(2)
    
    
    622$
    7,521Net Assets Acquired:Cash
    
    $
    29Non-cash working capital, net
    
    
    (606
    )Oil and gas properties  unproved
    
    
    10,742Future income tax liability
    
    
    (2,644
    )$
    7,521
 (1)
    
    The Cdn.$2.70 was the closing share price on the TSX on November 26, 2009, the
date of acquisition.(2)
    
    See Note 8.  87




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##### Table of Contents



Canada
 Talisman
  Back-in Right
 (a)
    
    100% of the Companys acquisition cost and certain expenses in respect of the
relevant lease if the Back-in Right is exercised on or before July 11, 2009;
 (b)
    
    150% of the Companys acquisition cost and certain expenses in respect of the
relevant lease if the Back-in Right is exercised after July 11, 2009 but on or before
July 11, 2010; or
 (c)
    
    200% of the Companys acquisition cost and certain expenses in respect of the
relevant lease if the Back-in Right is exercised after July 11, 2010 but on or before
July 11, 2011.
  Ecuador
 IE Ecuador Petroecuador Petroproduccion TM IE Latin America
  19. DISCONTINUED OPERATIONS
   88




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##### Table of Contents



Year Ended December 31,2009
    
    
    2008
    
    
    2007RevenueOil and gas revenue
    
    $
    5,455
    
    
    $
    18,120
    
    
    $
    12,270Gain (loss) on derivative instruments
    
    
    189
    
    
    
    278
    
    
    
    (5,594
    )Interest income
    
    
    8
    
    
    
    98
    
    
    
    1525,652
    
    
    
    18,496
    
    
    
    6,828ExpensesOperating costs
    
    
    2,132
    
    
    
    5,137
    
    
    
    4,319General and administrative
    
    
    139
    
    
    
    2,413
    
    
    
    1,972Depletion and depreciation
    
    
    3,772
    
    
    
    6,143
    
    
    
    5,884Interest expense and financing costs
    
    
    173
    
    
    
    520
    
    
    
    4276,216
    
    
    
    14,213
    
    
    
    12,602Income (Loss) before disposition
    
    
    (564
    )
    
    
    4,283
    
    
    
    (5,774
    )Loss on disposition (net of tax of $29.6 million
for 2009, nil for 2008 and 2007)
    
    
    (23,357
    )
    
    
    
    
    
    
    Net Income (Loss) from discontinued operations
    
    $
    (23,921
    )
    
    $
    4,283
    
    
    $
    (5,774
    )
  December 31, 2008AssetsCurrent Assets:Cash and cash equivalents
    
    $
    788Accounts receivable
    
    
    1,067Prepaid and other current assets
    
    
    172Derivative instruments
    
    
    7002,727Oil and gas properties and equipment, net
    
    
    32,577Future income tax assets
    
    
    29,600Long term assets
    
    
    467$
    65,371LiabilitiesCurrent Liabilities:Accounts payable and accrued liabilities
    
    $
    874Debt  current portion
    
    
    5,200Derivative instruments
    
    
    6,074Asset retirement obligations
    
    
    1,810$
    7,884
   89




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##### Table of Contents



20. SUBSEQUENT EVENT
 Private
Placement Special Warrants
  Holdings Sunwing Optionee Contingent Option
  90




---



##### Table of Contents



21. ADDITIONAL DISCLOSURES REQUIRED UNDER U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  Consolidated Balance Sheets
  As at December 31, 2009
    
    
    As at December 31, 2008Canadian
    
    
    Increase
    
    
    
    
    U.S.
    
    
    Canadian
    
    
    Increase
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAP
    
    
    GAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAPAssetsCurrent Assets:Cash and cash equivalents
    
    $
    21,512
    
    
    $
    
    
    
    
    
    $
    21,512
    
    
    $
    38,477
    
    
    $
    
    
    
    
    
    $
    38,477Accounts receivable
    
    
    5,021
    
    
    
    
    
    
    
    
    
    5,021
    
    
    
    3,802
    
    
    
    
    
    
    
    
    
    3,802Note receivable
    
    
    225
    
    
    
    
    
    
    
    
    
    225
    
    
    
    
    
    
    
    
    
    
    
    
    
    Prepaid and other current assets
    
    
    771
    
    
    
    
    
    
    
    
    
    771
    
    
    
    637
    
    
    
    
    
    
    
    
    
    637Restricted cash
    
    
    2,850
    
    
    
    
    
    
    
    
    
    2,850
    
    
    
    850
    
    
    
    
    
    
    
    
    
    850Derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,459
    
    
    
    
    
    
    
    
    
    1,459Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,727
    
    
    
    
    
    
    
    
    
    2,727Total Current Assets
    
    
    30,379
    
    
    
    
    
    
    
    
    
    30,379
    
    
    
    47,952
    
    
    
    
    
    
    
    
    
    47,952Oil and gas properties
and development costs, net
    
    
    158,392
    
    
    
    (38,500
    )
    
    (i)
    
    
    139,346
    
    
    
    143,974
    
    
    
    (38,500
    )
    
    (i)
    
    
    114,38520,315
    
    
    (ii)
    
    
    
    
    
    
    
    
    
    
    9,929
    
    
    (ii)
    
    
    (iii)
    
    
    
    
    
    
    
    
    
    
    (1,018
    )
    
    (iii)(861
    )
    
    (iv)Intangible assets  technology
    
    
    92,153
    
    
    
    
    
    
    
    
    
    92,153
    
    
    
    92,153
    
    
    
    
    
    
    
    
    
    92,153Long term assets
    
    
    839
    
    
    
    
    
    
    
    
    
    839
    
    
    
    152
    
    
    
    451
    
    
    (v)
    
    
    603Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,644
    
    
    
    (24,890
    )
    
    (xii)
    
    
    37,754Total Assets
    
    $
    281,763
    
    
    $
    (19,046
    )
    
    
    
    $
    262,717
    
    
    $
    346,875
    
    
    $
    (54,028
    )
    
    
    
    $
    292,847Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable
and accrued liabilities
    
    $
    10,779
    
    
    $
    
    
    
    
    
    $
    10,779
    
    
    $
    9,219
    
    
    $
    
    
    
    
    
    $
    9,219Income tax payable
    
    
    530
    
    
    
    
    
    
    
    
    
    530
    
    
    
    650
    
    
    
    
    
    
    
    
    
    650Debt  current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    
    
    
    
    
    
    412Derivative instruments
    
    
    
    
    
    
    8,249
    
    
    (viii)
    
    
    8,249
    
    
    
    
    
    
    
    1,121
    
    
    (viii)
    
    
    1,121Asset retirement obligation
 current portion
    
    
    753
    
    
    
    
    
    
    
    
    
    753
    
    
    
    
    
    
    
    
    
    
    
    
    
    Liabilities of discontinued
operations  current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,074
    
    
    
    
    
    
    
    
    
    6,074Total Current Liabilities
    
    
    12,062
    
    
    
    8,249
    
    
    
    
    
    20,311
    
    
    
    16,355
    
    
    
    1,121
    
    
    
    
    
    17,476Long term debt
    
    
    36,934
    
    
    
    1,225
    
    
    (iv)
    
    
    38,005
    
    
    
    37,855
    
    
    
    2,086
    
    
    (iv)
    
    
    40,392(154
    )
    
    (iv)
    
    
    
    
    
    
    
    
    
    
    451
    
    
    (v)Asset retirement obligations
    
    
    195
    
    
    
    
    
    
    
    
    
    195
    
    
    
    1,928
    
    
    
    
    
    
    
    
    
    1,928Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    
    
    
    
    
    
    1,900Future income tax liability
    
    
    22,643
    
    
    
    
    
    
    
    
    
    22,643
    
    
    
    29,600
    
    
    
    
    
    
    
    
    
    29,600Liabilities of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,810
    
    
    
    
    
    
    
    
    
    1,810Total Liabilities
    
    
    73,734
    
    
    
    9,320
    
    
    
    
    
    83,054
    
    
    
    89,448
    
    
    
    3,658
    
    
    
    
    
    93,106Shareholders Equity:Share capital
    
    
    422,322
    
    
    
    74,455
    
    
    (vi)
    
    
    510,784
    
    
    
    413,857
    
    
    
    74,455
    
    
    (vi)
    
    
    502,372(551
    )
    
    (vii)
    
    
    
    
    
    
    
    
    
    
    (498
    )
    
    (vii)1,358
    
    
    (ix)
    
    
    
    
    
    
    
    
    
    
    1,358
    
    
    (ix)13,200
    
    
    (viii)
    
    
    
    
    
    
    
    
    
    
    13,200
    
    
    (viii)Purchase warrants
    
    
    19,427
    
    
    
    (19,427
    )
    
    (viii)
    
    
    
    
    
    
    18,805
    
    
    
    (18,805
    )
    
    (viii)
    
    
    Contributed surplus
    
    
    20,029
    
    
    
    (3,197
    )
    
    (vii)
    
    
    13,885
    
    
    
    16,862
    
    
    
    (3,250
    )
    
    (vii)
    
    
    10,665(2,947
    )
    
    (viii)
    
    
    
    
    
    
    
    
    
    
    (2,947
    )
    
    (viii)Convertible note
    
    
    2,086
    
    
    
    (2,086
    )
    
    (iv)
    
    
    
    
    
    
    2,086
    
    
    
    (2,086
    )
    
    (iv)
    
    
    Accumulated deficit
    
    
    (255,835
    )
    
    
    (89,171
    )
    
    
    
    
    (345,006
    )
    
    
    (194,183
    )
    
    
    (119,113
    )
    
    
    
    
    (313,296
    )Total Shareholders Equity
    
    
    208,029
    
    
    
    (28,366
    )
    
    
    
    
    179,663
    
    
    
    257,427
    
    
    
    (57,686
    )
    
    
    
    
    199,741Total Liabilities
and Shareholders Equity
    
    $
    281,763
    
    
    $
    (19,046
    )
    
    
    
    $
    262,717
    
    
    $
    346,875
    
    
    $
    (54,028
    )
    
    
    
    $
    292,847
  91




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##### Table of Contents



Oil and Gas Properties and Development Costs
   TM TM TM
  Deferred Financing Costs
   92




---



##### Table of Contents



Shareholders Equity
  APB FASB ASC SFAS
    93




---



##### Table of Contents



Consolidated Statements of Operations
  Year Ended December 31, 2009Canadian
    
    
    Increase
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAPRevenueOil revenue
    
    $
    24,968
    
    
    $
    
    
    
    
    
    $
    24,968Loss on derivative instruments
    
    
    (1,335
    )
    
    
    (6,506
    )
    
    (viii)
    
    
    (7,841
    )Interest income
    
    
    25
    
    
    
    
    
    
    
    
    
    25Total Revenue
    
    
    23,658
    
    
    
    (6,506
    )
    
    
    
    
    17,152ExpensesOperating costs
    
    
    10,191
    
    
    
    
    
    
    
    
    
    10,191General and administrative
    
    
    21,693
    
    
    
    
    
    
    
    
    
    21,693Business and technology development
    
    
    9,501
    
    
    
    150
    
    
    (x)
    
    
    9,651Depletion and depreciation
    
    
    19,868
    
    
    
    (10,574
    )
    
    (xi)
    
    
    9,294Foreign exchange loss
    
    
    5,220
    
    
    
    (154
    )
    
    (iv)
    
    
    5,066Interest expense and financing costs
    
    
    856
    
    
    
    
    
    
    
    
    
    856Provision for impairment of intangible asset and development costs
    
    
    1,903
    
    
    
    (980
    )
    
    (x)
    
    
    923Total Expenses
    
    
    69,232
    
    
    
    (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 from continuing operations
    
    
    (37,731
    )
    
    
    5,052
    
    
    
    
    
    (32,679
    )Net income (loss) from discontinued operations (net of tax of $29.6 million)
    
    
    (23,921
    )
    
    
    24,890
    
    
    (xii)
    
    
    969Net Loss and Comprehensive Loss
    
    
    (61,652
    )
    
    
    29,942
    
    
    
    
    
    (31,710
    )Net income (loss) per shareNet Loss from continuing operations, basic and diluted
    
    $
    (0.13
    )
    
    $
    0.01
    
    
    
    
    $
    (0.12
    )Net Income (loss) from 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 shares (in thousands)Basic and Diluted
    
    
    279,722
    
    
    
    
    
    
    
    
    
    279,722
  94




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##### Table of Contents



Year Ended December 31, 2008Canadian
    
    
    Increase
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAPRevenueOil revenue
    
    $
    48,370
    
    
    $
    
    
    
    
    
    $
    48,370Gain on derivative instruments
    
    
    1,688
    
    
    
    4,665
    
    
    (viii)
    
    
    6,353Interest income
    
    
    612
    
    
    
    
    
    
    
    
    
    612Total Revenue
    
    
    50,669
    
    
    
    4,665
    
    
    
    
    
    55,335ExpensesOperating costs
    
    
    21,515
    
    
    
    
    
    
    
    
    
    21,515General and administrative
    
    
    14,252
    
    
    
    
    
    
    
    
    
    14,252Business and technology development
    
    
    6,453
    
    
    
    
    
    
    
    
    
    6,453Depletion and depreciation
    
    
    25,761
    
    
    
    (2,820
    )
    
    (xi)
    
    
    22,941Foreign exchange loss
    
    
    1,527
    
    
    
    
    
    
    
    
    
    1,527Interest expense and financing costs
    
    
    1,309
    
    
    
    
    
    
    
    
    
    1,309Provision for impairment of intangible asset and development costs
    
    
    15,054
    
    
    
    (4,640
    )
    
    (x)
    
    
    10,414Write off of deferred financing costs
    
    
    2,621
    
    
    
    
    
    
    
    
    
    2,621Provision for impairment of oil and gas properties
    
    
    
    
    
    
    21,560
    
    
    (ix)
    
    
    21,560Total Expenses
    
    
    88,492
    
    
    
    14,100
    
    
    
    
    
    102,592Loss from continuing operations before income taxes
    
    
    (37,822
    )
    
    
    (9,435
    )
    
    
    
    
    (47,257
    )Current recovery of income taxes
    
    
    (654
    )
    
    
    
    
    
    
    
    
    (654
    )Net loss from continuing operations
    
    
    (38,476
    )
    
    
    (9,435
    )
    
    
    
    
    (47,911
    )Net income (loss) from discontinued operations
    
    
    4,283
    
    
    
    (19,423
    )
    
    (xii)
    
    
    (15,140
    )Net Loss and Comprehensive Loss
    
    
    (34,193
    )
    
    
    (28,858
    )
    
    
    
    
    (63,051
    )Net income (loss) per shareNet Loss from 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 shares (in thousands)Basic and Diluted
    
    
    258,815
    
    
    
    
    
    
    
    
    
    258,815
  95




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##### Table of Contents



Year Ended December 31, 2007Canadian
    
    
    Increase
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    GAAPRevenueOil revenue
    
    $
    31,365
    
    
    $
    
    
    
    
    
    $
    31,365Loss on derivative instruments
    
    
    (4,993
    )
    
    
    592
    
    
    (iii)
    
    
    (4,401
    )Interest income
    
    
    317
    
    
    
    
    
    
    
    
    
    317Total Revenue
    
    
    26,689
    
    
    
    592
    
    
    
    
    
    27,281ExpensesOperating costs
    
    
    13,000
    
    
    
    
    
    
    
    
    
    13,000General and administrative
    
    
    9,803
    
    
    
    
    
    
    
    
    
    9,803Business and technology development
    
    
    9,625
    
    
    
    
    
    
    
    
    
    9,625Depletion and depreciation
    
    
    20,640
    
    
    
    (3,470
    )
    
    (ix)
    
    
    17,170Foreign exchange loss
    
    
    301
    
    
    
    
    
    
    
    
    
    301Interest expense and financing costs
    
    
    623
    
    
    
    
    
    
    
    
    
    623Provision for impairment of intangible asset and development costs
    
    
    
    
    
    
    (6,011
    )
    
    (x)
    
    
    (6,011
    )Provision for impairment of oil and gas properties
    
    
    6,130
    
    
    
    (280
    )
    
    (ix)
    
    
    5,850Total Expenses
    
    
    60,122
    
    
    
    (9,761
    )
    
    
    
    
    50,361Net loss from continuing operations
    
    
    (33,433
    )
    
    
    10,353
    
    
    
    
    
    (23,080
    )Net income (loss) from discontinued operations
    
    
    (5,774
    )
    
    
    1,462
    
    
    
    
    
    (4,312
    )Net Loss and Comprehensive Loss
    
    
    (39,207
    )
    
    
    11,815
    
    
    
    
    
    (27,392
    )Net income (loss) per shareNet Loss from continuing operations, basic and diluted
    
    $
    (0.14
    )
    
    $
    0.04
    
    
    
    
    $
    (0.10
    )Net Income (loss) from discontinued operations, basic and diluted
    
    
    (0.02
    )
    
    
    0.01
    
    
    
    
    
    (0.01
    )Net Loss per share, basic and diluted
    
    $
    (0.16
    )
    
    $
    0.05
    
    
    
    
    $
    (0.11
    )Weighted Average Number of shares (in thousands)Basic and Diluted
    
    
    242,362
    
    
    
    
    
    
    
    
    
    242,362
 Development Costs
 TM
 TM TM
  Depletion and Depreciation
   96




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##### Table of Contents



Discontinued Operations
   Consolidated Statements of Cash Flows
 TM
 Additional U.S. GAAP Disclosures
 Oil and Gas Properties and Development Costs
  As at December 31, 2009Business andTechnologyCanada
    
    
    Ecuador
    
    
    Asia
    
    
    Corporate
    
    
    Development
    
    
    TotalProperty acquisition costs
    
    $
    77,093
    
    
    $
    852
    
    
    $
    42,298
    
    
    $
    
    
    
    $
    
    
    
    $
    120,243Capitalized Interest
    
    
    3,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,049Exploration costs
    
    
    6,437
    
    
    
    2,988
    
    
    
    32,831
    
    
    
    
    
    
    
    
    
    
    
    42,256Development costs
    
    
    
    
    
    
    
    
    
    
    87,100
    
    
    
    
    
    
    
    
    
    
    
    87,100Production facilities
    
    
    
    
    
    
    2,483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,483HTLTM 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
  97




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##### Table of Contents



As at December 31, 2008Business andTechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    Corporate
    
    
    Development
    
    
    TotalProperty acquisition costs
    
    $
    75,732
    
    
    $
    863
    
    
    $
    31,137
    
    
    $
    
    
    
    $
    
    
    
    $
    107,732Capitalized Interest
    
    
    1,672
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,672Exploration costs
    
    
    3,686
    
    
    
    591
    
    
    
    31,575
    
    
    
    
    
    
    
    
    
    
    
    35,852Development costs
    
    
    
    
    
    
    
    
    
    
    83,315
    
    
    
    
    
    
    
    
    
    
    
    83,315HTLTM facilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,590
    
    
    
    19,590Support equipment and general property
    
    
    20
    
    
    
    90
    
    
    
    412
    
    
    
    13
    
    
    
    406
    
    
    
    94181,110
    
    
    
    1,544
    
    
    
    146,439
    
    
    
    13
    
    
    
    19,996
    
    
    
    249,102Accumulated depletion and depreciation
    
    
    (6
    )
    
    
    
    
    
    
    (72,030
    )
    
    
    (6
    )
    
    
    (7,628
    )
    
    
    (79,670
    )Provision for impairment
    
    
    
    
    
    
    
    
    
    
    (55,050
    )
    
    
    
    
    
    
    
    
    
    
    (55,050
    )$
    81,104
    
    
    $
    1,544
    
    
    $
    19,359
    
    
    $
    7
    
    
    $
    12,368
    
    
    $
    114,382
  Incurred inPrior toTotal
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2007Property Acquisition
    
    $
    89,206
    
    
    $
    11,920
    
    
    $
    77,187
    
    
    $
    
    
    
    $
    99Exploration
    
    
    25,530
    
    
    
    17,655
    
    
    
    6,325
    
    
    
    129
    
    
    
    1,421$
    114,736
    
    
    $
    29,575
    
    
    $
    83,512
    
    
    $
    129
    
    
    $
    1,520
  Incurred inPrior toTotal
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2007CanadaTamarack
    
    $
    93,570
    
    
    $
    12,480
    
    
    $
    81,090
    
    
    $
    
    
    
    $
    EcuadorBlock 20
    
    
    6,755
    
    
    
    5,301
    
    
    
    1,454
    
    
    
    
    
    
    
    AsiaZitong Block
    
    
    3,249
    
    
    
    632
    
    
    
    968
    
    
    
    129
    
    
    
    1,520Nyalga Block
    
    
    11,162
    
    
    
    11,162
    
    
    
    
    
    
    
    
    
    
    
    14,411
    
    
    
    11,794
    
    
    
    968
    
    
    
    129
    
    
    
    1,520$
    114,736
    
    
    $
    29,575
    
    
    $
    83,512
    
    
    $
    129
    
    
    $
    1,520
      98




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##### Table of Contents



Accounts Payable and Accrued Liabilities
  As at December 31,2009
    
    
    2008Trade payables
    
    $
    3,767
    
    
    $
    4,659Accrued general and administrative expenses
    
    
    784
    
    
    
    1,112Accrued operating expenses
    
    
    515
    
    
    
    394Accrued capital expenditures
    
    
    2,820
    
    
    
    1,896Accrued salaries and related expenses
    
    
    2,123
    
    
    
    148Accrued interest
    
    
    770
    
    
    
    1,010$
    10,779
    
    
    $
    9,219
 ASC 820
 Level 1:
 Level 2:
 Level 3:
   As at December 31, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalDerivative instruments liabilities
    
    $
    7,582
    
    
    $
    
    
    
    $
    667
    
    
    $
    8,249
  Impact of New and Pending U.S. GAAP Accounting Standards
    99




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##### Table of Contents



Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilitiesa replacement of FASB Statement
No. 125, Accounting for Transfers of Financial Assets  An Amendment of
FASB Statement No. 140
  FSP
    100




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##### Table of Contents



ASU ASU 0905
  101




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##### Table of Contents



QUARTERLY FINANCIAL DATA IN ACCORDANCE WITH CANADIAN AND U.S. GAAP (UNAUDITED)
 2009
    
    
    20084th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr
    
    
    4th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st QtrTotal revenueCanadian GAAP
    
    $
    4,999
    
    
    $
    7,991
    
    
    $
    4,844
    
    
    $
    5,824
    
    
    $
    19,525
    
    
    $
    26,159
    
    
    $
    (3,249
    )
    
    $
    8,235U.S. GAAP
    
    $
    2,263
    
    
    $
    6,826
    
    
    $
    4,280
    
    
    $
    3,783
    
    
    $
    24,920
    
    
    $
    40,800
    
    
    $
    (15,453
    )
    
    $
    5,068Net income (loss) from
continuing operations:Canadian GAAP
    
    $
    (11,915
    )
    
    $
    (2,795
    )
    
    $
    (11,444
    )
    
    $
    (11,577
    )
    
    $
    (16,321
    )
    
    $
    4,822
    
    
    $
    (18,547
    )
    
    $
    (8,430
    )U.S. GAAP
    
    $
    (12,385
    )
    
    $
    (1,151
    )
    
    $
    (8,985
    )
    
    $
    (10,158
    )
    
    $
    (27,188
    )
    
    $
    20,206
    
    
    $
    (30,201
    )
    
    $
    (10,728
    )Net income (loss) from
discontinued operations:(net of tax):Canadian GAAP
    
    $
    
    
    
    $
    (23,290
    )
    
    $
    66
    
    
    $
    (697
    )
    
    $
    2,341
    
    
    $
    5,240
    
    
    $
    (3,184
    )
    
    $
    (114
    )U.S. GAAP
    
    $
    41
    
    
    $
    (689
    )
    
    $
    1,151
    
    
    $
    466
    
    
    $
    (18,212
    )
    
    $
    5,618
    
    
    $
    (2,780
    )
    
    $
    234Net income (loss) per share
 continuing operationsCanadian GAAP
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    (0.04
    )
    
    $
    (0.04
    )
    
    $
    (0.06
    )
    
    $
    0.02
    
    
    $
    (0.08
    )
    
    $
    (0.03
    )U.S. GAAP
    
    $
    (0.04
    )
    
    $
    (0.00
    )
    
    $
    (0.03
    )
    
    $
    (0.04
    )
    
    $
    (0.11
    )
    
    $
    0.08
    
    
    $
    (0.12
    )
    
    $
    (0.04
    )Net income (loss) per share
 discontinued operationsCanadian GAAP
    
    $
    0.00
    
    
    $
    (0.09
    )
    
    $
    0.00
    
    
    $
    (0.00
    )
    
    
    0.01
    
    
    
    0.02
    
    
    $
    (0.01
    )
    
    $
    (0.00
    )U.S. GAAP
    
    $
    0.00
    
    
    $
    (0.00
    )
    
    $
    0.00
    
    
    $
    0.01
    
    
    
    (0.06
    )
    
    
    0.02
    
    
    $
    (0.01
    )
    
    $
    0.00
  
 SUPPLEMENTARY DISCLOSURES ABOUT OIL AND GAS PRODUCTION ACTIVITIES (UNAUDITED)  (all tabular amounts are expressed in thousands of U.S. Dollars, except reserves and depletion rate
amounts)
   Oil and Gas Reserves
    102




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##### Table of Contents



Oil (MBbl)ChinaNet proved reserves, December 31, 2006
    
    
    1,785Revisions of previous estimates
    
    
    (22
    )Production
    
    
    (483
    )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
    
    
    1,101
 (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. Net proved developed reserves as at:December 31, 2007
    
    
    1,071December 31, 2008
    
    
    862December 31, 2009
    
    
    885
  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.
  103




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##### Table of Contents



2009ChinaFuture cash inflows
    
    $
    63,862Future development and restoration costs
    
    
    3,307Future production costs
    
    
    36,825Future income taxes
    
    
    593Future net cash flows
    
    
    23,13710% annual discount
    
    
    4,589Standardized measure
    
    $
    18,548
 2008ChinaFuture cash inflows
    
    $
    42,906Future development and restoration costs
    
    
    3,310Future production costs
    
    
    22,934Future net cash flows
    
    
    16,66210% annual discount
    
    
    2,576Standardized measure
    
    $
    14,086
 2007ChinaFuture cash inflows
    
    $
    118,911Future development and restoration costs
    
    
    5,190Future production costs
    
    
    52,446Future income taxes
    
    
    1,010Future net cash flows
    
    
    60,26510% annual discount
    
    
    10,674Standardized measure
    
    $
    49,591
 Note:
    
    The Company is using current costs in the preparation of the information shown in the tables
above and to determine proved reserves. However, future production costs may not be easily
comparable to historical production costs. The two main causes for this difficulty in analyzing of
future production costs when compared to historical spending are summarized as follows:
 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 crude oil in the PRC are
subject to a windfall gain levy (the Windfall Levy) if the monthly weighted average price
of crude oil is above $40 per barrel. The Windfall Levy is imposed at progressive rates
from 20% to 40% on the portion of the weighted average sales price exceeding $40 per
barrel. 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 $13.46 per barrel (bbl) increase in 2008 when compared to 2007. The Windfall
Levy accounted for $21.14 per bbl cost of the total $43.92 per 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 per 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.
  104




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##### Table of Contents



2009ChinaSale 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
 2008ChinaSale 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
 2007ChinaSale of oil and gas, net of production costs
    
    $
    (18,365
    )Net changes in prices and production costs
    
    
    16,322Net change in future development costs
    
    
    (3,545
    )Development costs incurred during the period
that reduced future development costs
    
    
    10,188Revisions of previous quantity estimates
    
    
    (898
    )Accretion of discount
    
    
    4,279Net change in income taxes
    
    
    (925
    )Changes in production rates (timing) and other
    
    
    (257
    )Increase
    
    
    6,799Standardized measure, beginning of year
    
    
    42,792Standardized measure, end of year
    
    $
    49,591
  105




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##### Table of Contents



For the year ended December 31,2009
    
    
    2008
    
    
    2007CanadaProperty acquisitionUnproved
    
    $
    1,361
    
    
    $
    75,732
    
    
    $
    Exploration
    
    
    11,119
    
    
    
    5,357
    
    
    
    12,480
    
    
    
    81,089
    
    
    
    EcuadorProperty acquisitionUnproved
    
    
    
    
    
    
    863
    
    
    
    Exploration
    
    
    5,301
    
    
    
    591
    
    
    
    5,301
    
    
    
    1,454
    
    
    
    AsiaProperty acquisitionUnproved
    
    
    11,161
    
    
    
    
    
    
    
    Exploration
    
    
    1,253
    
    
    
    1,956
    
    
    
    11,611Development
    
    
    3,785
    
    
    
    6,420
    
    
    
    11,88116,199
    
    
    
    8,376
    
    
    
    23,492Total
    
    $
    33,980
    
    
    $
    90,919
    
    
    $
    23,492
  ChinaYear ended December 31, 2009
    
    $
    16.06Year ended December 31, 2008
    
    $
    41.61Year ended December 31, 2007
    
    $
    32.73
  2009
    
    
    2008
    
    
    2007Oil and gas revenue
    
    $
    24,968
    
    
    $
    48,370
    
    
    $
    31,365Operating costs
    
    
    10,191
    
    
    
    21,515
    
    
    
    13,000Depletion
    
    
    7,479
    
    
    
    20,385
    
    
    
    15,832Provision for impairment
    
    
    
    
    
    
    21,560
    
    
    
    5,850Results of operations from
producing activities
    
    $
    7,298
    
    
    $
    (15,090
    )
    
    $
    (3,317
    )
 
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES
   106




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##### Table of Contents



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 financial statements in accordance with 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 financial statements.
 Internal
ControlIntegrated Framework.
 /s/ Robert M. Friedland
    
    /s/ Gerald D. SchiefelbeinRobert M. Friedland
    
    Gerald D. SchiefelbeinChief Executive Officer
    
    Chief Financial Officer
  REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
  Ivanhoe Energy Inc.:
 Internal
ControlIntegrated Framework
   107




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##### Table of Contents



Internal Control
 Integrated Framework
   
 CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  
 ITEM 9B.
    
    OTHER INFORMATION
   108




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##### Table of Contents



PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name and Municipality of Residence
    
    Age
    
    Position with the RegistrantA. ROBERT ABBOUD
Barrington Hills, Illinois
    
    
    80
    
    
    Co-Chairman and Independent Lead
Director (since May 2006)ROBERT M. FRIEDLAND
Singapore
    
    
    59
    
    
    Executive CoChairman, President and
Chief Executive Officer (since May 2008)
Director (since February 1995)HOWARD R. BALLOCH 
Beijing, China
    
    
    58
    
    
    Director (since January 2002)ROBERT G. GRAHAM
Ottawa, Ontario
    
    
    56
    
    
    Director (since April 2005)ROBERT A. PIRRAGLIA
Wellington, Florida
    
    
    60
    
    
    Director (since April 2005)BRIAN F. DOWNEY, C.M.A. 
Lake in the Hills, Illinois
    
    
    68
    
    
    Director (since July 2005)PETER G. MEREDITH, C.A.
Vancouver, British Columbia
    
    
    66
    
    
    Director (since December 2007)GERALD D. SCHIEFELBEIN 
Sycamore, Illinois
    
    
    52
    
    
    Chief Financial Officer (since
November 2009)DAVID A. DYCK 
Calgary, Alberta
    
    
    49
    
    
    Executive Vice President, Capital Markets
(since January 2010)IAN BARNETT 
Toronto, Ontario
    
    
    55
    
    
    Executive Vice President, Corporate
Development (since March 2007)MICHAEL A. SILVERMAN 
Houston, Texas
    
    
    57
    
    
    Executive Vice President, Technology
and Chief Technology Officer
(since September 2007)EDWIN J. VEITH 
Frazier Park, California
    
    
    51
    
    
    Executive Vice President, Upstream
(since September 2007)K. C. PATRICK CHUA
Hong Kong, China
    
    
    54
    
    
    Executive VicePresident
(since June 1999)GERALD G. MOENCH 
Lethbridge, Alberta
    
    
    61
    
    
    Executive VicePresident
(since June 1999)
 AGM
   109




---



##### Table of Contents



Robert Abboud
 Robert Friedland
 Howard Balloch
 Dr. Robert Graham Ensyn
 Robert
Pirraglia
  110




---



##### Table of Contents



Brian Downey
 Peter Meredith
 Gerald Schiefelbein
 Gordon Lancaster
 David Dyck
 Ian Barnett
 Michael Silverman
 Edwin Veith
 K.C. Patrick Chua
  111




---



##### Table of Contents



Gerald Moench
 Business Corporations Act
  Other Public Company Directorships
   Code of Business Conduct and Ethics
   112




---



##### Table of Contents



ITEM 11.
    
    EXECUTIVE COMPENSATION
  STATEMENT OF 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 the
Companys shortterm and longterm corporate goals;
 
    
    to ensure that the interests of the Companys executive officers and the interests of
the Companys shareholders are aligned;
 
    
    to enable us to attract, retain and motivate executive officers of the highest calibre
in light of the strong competition in the Companys industry for qualified personnel;
 
    
    to recognize that the successful implementation of the Company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 Relating to Executive Compensation.
  How We Make Compensation Decisions
     113




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##### Table of Contents



Elements of Total Compensation
   
    
    Base salary  paid in cash as a fixed amount of compensation for performing daytoday
responsibilities.
 
    
    Performance Bonus  Annual bonus awards, paid in common shares or cash, or both, earned
for achieving strategic corporate, business unit or individual goals.
 
    
    Incentive Awards  Equity incentives, in the form of stock options, granted to align
compensation with achievement of the Companys goals, creation of shareholder value, and
retention of executives over a longer period.
  Peer Comparator Group
   114




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##### Table of Contents



Base Salary
   Annual Bonus
     Incentive Compensation
   115




---



##### Table of Contents



2009 EXECUTIVE COMPENSATION DECISIONS
 Salary Compensation
    Bonus Compensation
   
    
    the $150 million equity financing transaction completed early in the first
quarter of 2010;
    
    the sale of the Companys U.S. operations and assets;
  116




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##### Table of Contents




    
    the consolidation of the Companys management and operating structure and the
closure of redundant offices;
 
    
    the progress made during the 2009 fiscal year in advancing the Companys core
projects having regard to the Companys limited financial resources; and
 
    
    the increase in the Companys market capitalization through share price
appreciation.
 Incentive Compensation
 .
  Other Compensation
   117




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##### Table of Contents



Performance Graph
  
 As at December 31,(Cdn.$)2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009Ivanhoe Energy Inc.
    
    $
    100
    
    
    $
    25
    
    
    $
    32
    
    
    $
    32
    
    
    $
    12
    
    
    $
    61S&P/TSX CompositeIndex
    
    $
    100
    
    
    $
    124
    
    
    $
    146
    
    
    $
    160
    
    
    $
    107
    
    
    $
    145
 Exchange Act
  OptionBased Awards
    118




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##### Table of Contents



SUMMARY COMPENSATION TABLE
 SUMMARY COMPENSATION TABLE (U.S.$)
 Non-equityincentive plan compensationOption-
    
    
    ($)Share-
    
    
    based
    
    
    Annual
    
    
    Long-term
    
    
    Pension
    
    
    All other
    
    
    Totalbased
    
    
    awards
    
    
    incentive
    
    
    incentive
    
    
    value
    
    
    compensation
    
    
    compensationName and principal position
    
    Year
    
    
    Salary ($)
    
    
    awards ($)
    
    
    ($)(4)
    
    
    plans
    
    
    plans(2)
    
    
    ($)
    
    
    ($)
    
    
    ($)Friedland, Robert 

Executive Co-Chairman, President & CEO
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1)2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lancaster, Gordon 

CFO
    
    
    2009
    
    
    
    250,942
    (3)(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,745
    (5)
    
    
    255,6872008
    
    
    
    259,552
    (3)
    
    
    29,965
    (10)
    
    
    50,550
    
    
    
    69,626
    (12)
    
    
    
    
    
    
    
    
    
    
    1,972
    (13)
    
    
    411,665Schiefelbein, Jerry

CFO
    
    
    2009
    
    
    
    61,750
    
    
    
    
    
    
    
    392,889
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    454,6392008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Barnett, Ian 
Executive VP, Corp Development
    
    
    2009
    
    
    
    223,129
    (3)
    
    
    
    
    
    
    361,820
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,253
    (6)
    
    
    589,2022008
    
    
    
    223,113
    (3)
    
    
    29,965
    (10)
    
    
    
    
    
    
    69,626
    (12)
    
    
    
    
    
    
    
    
    
    
    3,648
    (7)
    
    
    326,352Silverman, Michael 

Executive Vice President, Technology & Chief
Technology Officer
    
    
    2009
    
    
    
    272,250
    
    
    
    
    
    
    
    228,623
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,071
    (8)
    
    
    532,9442008
    
    
    
    261,938
    
    
    
    29,965
    (10)
    
    
    
    
    
    
    73,866
    12)
    
    
    
    
    
    
    
    
    
    
    32,945
    (9)
    
    
    398,714Dyck, David 
Executive Vice President, Capital Markets
    
    
    2009
    
    
    
    83,030
    (3)
    
    
    
    
    
    
    982,223
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,825
    (11)
    
    
    1,072,0782008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 NOTES:(1)

    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, and no portion of the Total Compensation disclosed in the summary compensation table was
received by Mr. Friedland as compensation for acting as a director.(2)

    The Company does not presently have a long-term incentive plan for any of its executive
officers, including its Named Executive Officers.(3)

    Amounts were paid to Mr. Lancaster, Mr. Barnett and Mr. Dyck in Canadian currency. Salaries
have been converted to US currency based on the noon buying price for Canadian currency of the Bank
of Canada and Federal Reserve Bank of New York on the date of each pay period during 2009 and 2008
respectively.(4)

    The Company used the Black-Scholes option-pricing model for determining the fair value of stock
options issued at the grant date. The practice of the Company is to grant all option based awards
in Canadian currency, then convert the grant date fair value amount to U.S. currency for reporting
the value of the grants in the Companys financial statements. For 2009 the conversion rate is the
noon buying price for Canadian currency of the bank of Canada on the date the grant was made on
October 15, 2009 which was .9706 for each of Messrs. Schiefelbein and Dyck, and .9422 for options
granted to each of Messrs. Barnett and Silverman on September 17, 2009. For 2008 the conversion
rate is the noon buying price for Canadian currency of the Federal Reserve Bank of New York noon
rate on March 11, 2008 which was .9953 for options granted to Mr. Lancaster.(5)

    Includes: $4,745 paid for life insurance, long term disability, medical and dental insurance.(6)

    Includes: $4,253 paid for life insurance, long term disability, medical and dental insurance.(7)

    Includes: $3,648 paid for life insurance, long term disability, medical and dental insurance. 119




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##### Table of Contents



(8)
    
    Includes: $22,000 paid as a contribution to Mr. Silvermans 401(k) retirement plan; and $10,071
paid for life insurance and long term disability premium.(9)
    
    Includes: $20,496 paid as a contribution to Mr. Silvermans 401(k) retirement plan; and $12,449
paid for life insurance and long term disability premiums.(10)
    
    The grant date fair value is determined by the closing trading price for the Companys common
shares on the day the Company delivered a treasury order for the share based award to the Companys
transfer agent. The share based awards granted to the Named Executive Officers and listed in the
Summary Compensation Table were based on the closing price for the Companys common shares on
August 5, 2008. The grant date fair value was US$2.26.(11)
    
    Includes: $5,250 paid for contribution to Mr. Dycks Canadian savings plan; $1,575 paid for
life insurance, long term disability, medical and dental insurance and parking.(12)
    
    Includes US$73,866 for Mr. Silverman and Cdn.$73,866 for Messrs. Lancaster and Barnett
(converted to US$69,626 at the US Federal Reserve noon rate on August 15, 2008: 0.9426), that was
paid on August 15, 2008, as an advance on bonuses payable for the year ending 2008, which are
normally determined and paid in mid-2009.(13)
    
    Includes: $1,972 paid for life insurance, long term disability, medical and dental insurance.  120




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##### Table of Contents



INCENTIVE PLAN AWARDS
 Outstanding share-based awards and option-based awards
 Option-based Awards
    
    
    Share-based AwardsMarket orNumber of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    payout valuesecurities
    
    
    
    
    
    
    
    
    
    
    Value of
    
    
    Number of
    
    
    of share-basedunderlying
    
    
    
    
    
    
    
    
    
    
    unexercised in-
    
    
    shares or units
    
    
    awards thatunexercised
    
    
    Option
    
    
    
    
    
    
    the-money
    
    
    of shares that
    
    
    have notoptions
    
    
    exercise price
    
    
    Option
    
    
    options
    
    
    have not vested
    
    
    vestedName
    
    (#)
    
    
    ($)
    
    
    expiration date
    
    
    (US$)(1)
    
    
    (#)
    
    
    (US$)Friedland, Robert
Executive Co-Chairman, President & CEO
    
    
    2,500,000
    (2)
    
    Cdn$1.61
    
    March 5, 2013
    
    $
    3,224,813
    
    
    
    
    
    
    
    Lancaster, Gordon

CFO
    
    
    50,000
    (3)
    
    Cdn$1.68
    
    March 11, 2013
    
    $
    64,496
    
    
    
    
    
    
    
    Schiefelbein, Gerald
CFO
    
    
    200,000
    (7)
    
    Cdn$2.51
    
    Oct. 1, 2016
    
    $
    85,995
    
    
    
    
    
    
    
    Barnett, Ian
    
    
    150,000
    (8)
    
    Cdn$2.22
    
    Sept. 17, 2014Executive Vice President,
    
    
    226,000
    
    
    US$1.92
    
    Oct. 4, 2012Corporate Development
    
    
    150,000
    (4)
    
    US$2.06
    
    March 15, 2012124,481
    
    
    US$2.41
    
    July 20, 2010
    
    $
    499,017
    
    
    
    
    
    
    
    Silverman, Michael
    
    
    150,000
    (8)
    
    Cdn$2.22
    
    Sept. 17, 2014Executive Vice President,
    
    
    270,000

(10)
    
    US$1.92
    
    Oct. 4, 2012Technology and Chief
    
    
    150,000
    (5)
    
    US$1.92
    
    Sept. 19, 2012Technology Officer
    
    
    80,000
    (6)
    
    US$2.06
    
    May 28, 2012
    
    $
    564,861
    
    
    
    
    
    
    
    Dyck, David 

Executive Vice President, Capital Markets
    
    
    500,000

(9)
    
    Cdn$2.51
    
    Oct. 15, 2016
    
    $
    214,988
    
    
    
    
    
    
    
    
 NOTES:(1)

    The
Value of unexercised in-the-money options
is calculated on the basis of the difference
between the closing price of the common shares on the TSX
on December 31, 2009 and the Exercise Price of the total
unexercised options on the TSX and NASDAQ. The value of options
granted in Canadian currency was converted to US currency based on
the noon buying price for Canadian currency of the Bank of Canada as
of December 31, 2009.(2)

    This option grant
vests 20% on March 5, 2008, and 20% on each of the four anniversaries
thereafter, and will be fully vested on March 5, 2012.(3)

    This option grant vests
20% on March 11, 2008, and 20% on each of the four anniversaries
thereafter, and will be fully vested on March 11, 2012.(4)

    This option grant vested
33 1/3% on March 15, 2008, and 33 1/3% on each of the two
anniversaries thereafter and will be fully vested on March 15, 2010.(5)

    This option grant vests
20% on September 19, 2007, and 20% on each of the four anniversaries
thereafter, and will be fully vested on September 19, 2011.(6)

    This option grant vests
25% on May 28, 2008, and 25% on each of the three anniversaries
thereafter, and will be fully vested on May 28, 2011.(7)

    This option grant vests
25% on October 1, 2010, and 25% on each of the three anniversaries
thereafter, and will be fully vested on October 1, 2013.(8)

    This option grant vests 20%
on September 17, 2009, and 20% on each of the four anniversaries
thereafter, and will be fully vested on September 17, 2013.(9)

    This option grant vests
25% on October 15, 2010, and 25% on each of the three anniversaries
thereafter, and will be fully vested on October 15, 2013.(10)

    This option grant vested 20%
on October 4, 2007, and will continue to vest over the four years following October 4, 2007, upon the achievement of
performance milestones.  121




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Incentive Plan Awards  value vested or earned during 2009
 Non-equity incentive planOption-based awards  Value
    
    
    Share-based awards  Value
    
    
    compensation  Value earnedvested during the year
    
    
    vested during the year
    
    
    during the yearName
    
    (U.S.$)(1)
    
    
    (U.S.$)
    
    
    (U.S.$)Friedland, Robert 

Executive Co-Chairman, President & CEO
    
    Nil
    
    
    
    
    
    
    Lancaster, Gordon

CFO
    
    Nil
    
    
    
    
    
    
    Schiefelbein, Gerald

CFO
    
    Nil
    
    
    
    
    
    
    Barnett, Ian

Executive Vice President, Corporate Development
    
    $
    96,214
    
    
    
    
    
    
    
    Silverman, Michael

Executive Vice President, Technology and Chief
Technology Officer
    
    $
    113,566
    
    
    
    
    
    
    
    Dyck, David

Executive Vice President, Capital Markets
    
    Nil
    
    
    
    
    
    
    
 NOTES:(1)

    A Nil amount indicates that no options held by the Named Executive Officer vested during
2009 at an in the money amount when the exercise price was compared to the closing price of the
Companys common shares on the TSX and NASDAQ, as applicable, on the date of vesting.
The value vested of option based awards in Canadian currency was
converted into US Currency using the noon buying price for Canadian
currency of the Bank of Canada on the date of vesting. PENSION PLAN BENEFITS
  TERMINATION AND CHANGE OF CONTROL BENEFITS
      122




---



##### Table of Contents



123




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##### Table of Contents



DIRECTOR COMPENSATION
  THE FOLLOWING TABLES REFLECT COMPENSATION EARNED BY NON-MANAGEMENT DIRECTORS IN RESPECT OF FISCAL
2009.
 Director Compensation Table
(U.S.$)
 Share-
    
    
    Option-
    
    
    Non-equitybased
    
    
    based
    
    
    incentive plan
    
    
    Pension
    
    
    All otherFees Earned
    
    
    awards
    
    
    awards
    
    
    compensation
    
    
    value
    
    
    compensation
    
    
    TotalName
    
    (US$)
    
    
    (US$)
    
    
    (US$)(1)
    
    
    (US$)
    
    
    (US$)
    
    
    (US$)
    
    
    (US$)Abboud, A. Robert
    
    
    88,333
    
    
    
    
    
    
    
    159,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    247,906Balloch, Howard
    
    
    71,667
    
    
    
    
    
    
    
    53,191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,858Downey, Brian
    
    
    69,167
    
    
    
    
    
    
    
    53,191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122,358Graham, Robert
    
    
    32,667
    
    
    
    
    
    
    
    53,191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,858Meredith, Peter
    
    
    48,667
    
    
    
    
    
    
    
    53,191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,858Pirraglia, Robert
    
    
    56,667
    
    
    
    
    
    
    
    53,191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109,858
 NOTES:(1)

    The Company used the
Black-Scholes option-pricing model for determining the fair value of
stock options issued at the grant date. The practice of the Company
is to grant all option based awards in Canadian currency, then
convert the grant date fair value amount to U.S. currency for
reporting the value of the grants in the Companys financial
statements. The conversion rate is the noon buying price for Canadian
currency of the bank of Canada on the date the grant was made on
April 29, 2009 which was .8328 for each of 2009 grants.  124




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##### Table of Contents



Share-based awards, option-based awards and non-equity incentive plan compensation
 Outstanding share-based awards and option-based awards
 Option-based Awards
    
    
    Share-based AwardsMarket orNumber of
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    payout valuesecurities
    
    
    
    
    
    
    
    
    
    
    value of
    
    
    Number of
    
    
    of share-basedunderlying
    
    
    
    
    
    
    
    
    
    
    unexercised in-
    
    
    shares or units
    
    
    awards thatunexercised
    
    
    Option
    
    
    
    
    
    
    the-money
    
    
    of shares that
    
    
    have notoptions
    
    
    exercise price
    
    
    Option
    
    
    options
    
    
    have not vested
    
    
    vestedName
    
    (#)
    
    
    ($)
    
    
    expiration date
    
    
    (US$)(1)
    
    
    (#)
    
    
    (US$)Abboud, A. Robert
    
    
    150,000
    
    
    Cdn$1.51
    
    April 29, 201650,000
    
    
    US$2.69
    
    May 29, 2013480,000
    
    
    US$2.85
    
    May 15, 2011
    
    $
    221,121
    
    
    
    
    
    
    
    Balloch, Howard
    
    
    50,000
    
    
    Cdn$1.51
    
    April 29, 201650,000
    
    
    Cdn$2.66
    
    May 29, 201350,000
    
    
    Cdn$2.30
    
    May 3, 201250,000
    
    
    Cdn$3.12
    
    May 4, 201150,000
    
    
    Cdn$3.01
    
    May 5, 2010
    
    $
    115,138
    
    
    
    
    
    
    
    Downey, Brian
    
    
    50,000
    
    
    Cdn$1.51
    
    April 29, 201650,000
    
    
    US$2.69
    
    May 29, 201350,000
    
    
    US$2.06
    
    May 3, 201220,000
    
    
    US$2.80
    
    May 4, 2011130,000
    
    
    US$2.32
    
    July 22, 2010
    
    $
    189,174
    
    
    
    
    
    
    
    Graham, Robert
    
    
    50,000
    
    
    Cdn$1.51
    
    April 29, 201650,000
    
    
    Cdn$2.66
    
    May 29, 2013200,000
    
    
    Cdn$2.29
    
    March 8, 201250,000
    
    
    Cdn$3.12
    
    May 4, 2011150,000
    
    
    Cdn$3.01
    
    May 4, 2010
    
    $
    211,643
    
    
    
    
    
    
    
    Meredith, Peter
    
    
    50,000
    
    
    Cdn$1.51
    
    April 26, 201650,000
    
    
    Cdn$2.66
    
    May 29, 2013100,000
    
    
    Cdn$1.68
    
    March 11, 2013150,000
    
    
    Cdn$1.52
    
    Dec. 19, 2012
    
    $
    268,973
    
    
    
    
    
    
    
    Pirraglia, Robert
    
    
    50,000
    
    
    Cdn$1.51
    
    April 29, 201650,000
    
    
    US$2.69
    
    May 29, 201350,000
    
    
    US$2.06
    
    May 3, 201250,000
    
    
    US$2.80
    
    May 4, 2011200,000
    
    
    US$2.42
    
    May 5, 2010
    
    $
    208,774
    
    
    
    
    
    
    
    
 NOTES:(1)

    The Value of
unexercised in-the-money options is calculated on the basis of
the difference between the closing price of the common shares on the
TSX on December 31, 2009 and the Exercise Price of the total
unexercised options on the TSX and NASDAQ. The value of options
granted in Canadian currency was converted to US currency based on
the noon buying price for Canadian currency of the Bank of Canada as
of December 31, 2009.  125




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##### Table of Contents



Incentive Plan Awards  value vested or earned during 2009
 Non-equity incentive planOption-based awards  Value
    
    
    Share-based awards  Value
    
    
    compensation  Value earnedvested during the year
    
    
    vested during the year
    
    
    during the yearName
    
    (US$)(1)
    
    
    (US$)
    
    
    (US$)Abboud, A. Robert
    
    $
    6,596
    
    
    
    
    
    
    
    Balloch, Howard
    
    
    
    
    
    
    
    
    
    
    Downey, Brian
    
    
    
    
    
    
    
    
    
    
    Graham, Robert
    
    
    
    
    
    
    
    
    
    
    Meredith, Peter
    
    $
    39,091
    
    
    
    
    
    
    
    Pirraglia, Robert
    
    
    
    
    
    
    
    
    
    
    
 NOTES:(1)

    Nil amount indicates that no
options held by the Director vested during 2009 at an in the money
amount when the exercise price was compared to the closing price of
the Companys common shares on the TSX and NASDAQ, as
applicable, on the date of vesting.
The value vested of option based awards in Canadian
currency was converted into US Currency using the noon buying price
for Canadian currency of the Bank of Canada on the date of vesting.  126




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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  Name and Address of
    
    Number of Shares
    
    
    PercentageTitle of Class
    
    Beneficial Owner
    
    Beneficially Owned(1)
    
    
    of ClassCommon Shares
    
    Robert M. Friedland
    
    
    52,911,725
    (2)
    
    
    15.91150 Beach Road#25-03 The Gateway WestSingapore 189720Common Shares
    
    Directors and Executive Officers as a Group (15 persons)
    
    
    63,194,678
    (3)
    
    
    19.0Common Shares
    
    Caisse de depot et placement du Québec
    
    
    19,442,822
    
    
    
    5.99
 
 (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)
    
    50,994,620 common shares are held indirectly through Newstar Securities SRL, Premier Mines
SRL and Evershine SRL, companies controlled by Mr. Friedland.(3)
    
    Includes 5,373,775 unissued common shares issuable to directors and senior officers upon
exercise of incentive stock options. Security Ownership of Management
  Amountand Nature
    
    
    
    
    
    
    Incentive Stockof Beneficial
    
    
    Percentage
    
    
    OptionsOwnership (1)
    
    
    of Class
    
    
    Included in (a)Title of Class
    
    Name of Beneficial Owner
    
    (a)
    
    
    (b)
    
    
    (c)Common Shares
    
    A. Robert Abboud
    
    
    1,064,000
    
    
    
    .32
    
    
    
    564,000Common Shares
    
    Robert M. Friedland (2)
    
    
    52,911,725
    
    
    
    15.91
    
    
    
    1,500,000Common Shares
    
    Howard R. Balloch
    
    
    300,000
    
    
    
    .09
    
    
    
    250,000Common Shares
    
    Robert G. Graham
    
    
    4,976,726
    
    
    
    1.49
    
    
    
    480,000Common Shares
    
    Robert A. Pirraglia
    
    
    640,396
    
    
    
    .19
    
    
    
    400,000Common Shares
    
    Brian F. Downey
    
    
    400,000
    
    
    
    .12
    
    
    
    300,000Common Shares
    
    Peter G. Meredith
    
    
    298,000
    
    
    
    .09
    
    
    
    250,000Common Shares
    
    W. Gordon Lancaster
    
    
    94,710
    
    
    
    .03
    
    
    
    30,000Common Shares
    
    Gerald D. Schiefelbein
    
    
    0
    
    
    
    .00
    
    
    
    0Common Shares
    
    David A. Dyck
    
    
    450,000
    
    
    
    .13
    
    
    
    0Common Shares
    
    Michael A. Silverman
    
    
    421,659
    
    
    
    .13
    
    
    
    408,400Common Shares
    
    Edwin J. Veith
    
    
    454,531
    
    
    
    .14
    
    
    
    404,894Common Shares
    
    Patrick Chua
    
    
    190,318
    
    
    
    .06
    
    
    
    96,000Common Shares
    
    Gerald Moench
    
    
    272,151
    
    
    
    .08
    
    
    
    160,000Common Shares
    
    Ian Barnett
    
    
    720,462
    
    
    
    .22
    
    
    
    530,481Common Shares
    
    All directors and executive officers as a group (15 persons)
    
    
    63,194,678
    
    
    
    19.00
    
    
    
    5,373,775
 
 (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)
    
    50,994,620 common shares are held indirectly through Newstar Securities SRL, Premier Mines
SRL and Evershine SRL, companies controlled by Mr. Friedland.  127




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##### Table of Contents



Securities Authorized for Issuance under Equity Compensation Plans
  Equity
Compensation Plan Information
 Number of securitiesNumber of securities
    
    
    Weighted-average exercise
    
    
    remaining available for futureto be issued upon exercise
    
    
    price of outstanding
    
    
    issuance under equity compensationof outstanding options,
    
    
    options, warrants and
    
    
    plans (excluding securitieswarrants and rights
    
    
    rights (Cdn.$)
    
    
    reflected in column (a))Plan category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
Security holders
    
    
    14,928,150
    
    
    $
    2.26
    
    
    
    1,891,366Equity compensation
plans not approved
by Security holders
(1)
    
    
    85,000
    
    
    $
    2.30
    
    
    
    Total
    
    
    15,013,150
    
    
    $
    2.27
    
    
    
    1,891,366
 (1)
    
    A total of 85,000 stock options were granted
as employment inducements and therefore were not granted under the
Companys stock option plan. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Certain Business Relationships
       128




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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  Year ended December 31,2009
    
    
    2008% of fees
    
    
    
    
    
    
    % of feesapproved by
    
    
    
    
    
    
    approved byCdn.($000)
    
    
    Audit Committee
    
    
    Cdn.($000)
    
    
    Audit CommitteeAudit fees (a)
    
    $
    1,115
    
    
    
    100
    %
    
    $
    1,901
    
    
    
    100
    %Tax fees (b)
    
    
    138
    
    
    
    100
    %
    
    
    98
    
    
    
    100
    %All other fees (c)
    
    
    17
    
    
    
    100
    %
    
    
    15
    
    
    
    100
    %$
    1,270
    
    
    
    
    
    
    $
    2,014
 (a)
    
    Fees for audit services billed in 2009 and 2008 consisted of: 
    
    Audit of our annual financial statements
 
    
    Reviews of our quarterly financial statements
 
    
    Audit of our internal control over financial reporting in compliance with the
requirements of the Sarbanes Oxley Act of 2002.
 
    
    Comfort letters, statutory and regulatory audits, consents and other services related to
Canadian and U.S. securities regulatory matters
 
    
    Activities related to the audit of our Chinese subsidiary in contemplation of an initial
public offering totaling Cdn.$970,000 in 2008
 (b)
    
    Fees for tax services billed in 2009 and 2008 consisted of tax compliance and tax planning
and advice: 
    
    Fees for tax compliance services totaled Cdn.$118,000 and Cdn.$87,000 in 2009 and 2008,
respectively. Tax compliance services are services rendered based upon facts already in
existence or transactions that have already occurred to document, compute, and obtain
government approval for amounts to be included in tax filings and consisted of:
 i.
    
    Federal, state and local income tax return assistance
 ii.
    
    Preparation of expatriate tax returns
 iii.
    
    Assistance with tax return filings in certain foreign jurisdictions
 
    
    Fees for tax planning and advice services totaled Cdn.$20,000 and Cdn.$11,000 in 2009
and 2008, respectively. Tax planning and advice are services rendered with respect to
proposed transactions or that alter a transaction to obtain a particular tax result. Such
services consisted of tax advice related to structuring certain proposed mergers,
acquisitions and disposals.
 (c)
    
    All other fees includes fees for services billed in 2009 and 2008 other than the services
reported as Audit fees or Tax fees and include such items as the CPAB billing, a
subscription to an accounting research tool and human capital salary information.  Audit Committee Pre-Approval Policy
  Disclosure Categories Service List
   129




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PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  Exhibits3.1
    
    
    Articles of Ivanhoe Energy Inc. as amended May 3, 2007
(Incorporated by reference to Exhibit 3.1 of Form 10-K filed with
the Securities and Exchange Commission on March 17, 2008)3.2
    
    
    Bylaws of Ivanhoe Energy Inc. as amended May 15, 2001 and further
amended March 8, 2007 (Incorporated by reference to Exhibit 3.2 of
Form 10-K filed with the Securities and Exchange Commission on
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 (Incorporated by reference to Exhibit 3.15 of
Form 20-F filed with the Securities and Exchange Commission on
February 28, 2000)10.2
    
    
    Master License Agreement Amendment No. 1 dated October 11, 2000
between Syntroleum Corporation and Ivanhoe Energy Inc.
(Incorporated by reference to Exhibit 10.18 of Form 10-K filed with
the Securities and Exchange Commission on March 16, 2001)10.3
    
    
    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
(Incorporated by reference to Exhibit 10.12 of Form 10-K filed with
the Securities and Exchange Commission on March 19, 2003)10.4
    
    
    Employees and Directors Equity Incentive Plan as amended May 29,
200810.5
    
    
    Amendment No. 2 to Master License Agreement between Syntroleum
Corporation and the Company dated June 1, 2002 (Incorporated by
reference to Exhibit 10.6 of Form 10-K filed with the Securities
and Exchange Commission on March 15, 2006)10.6
    
    
    Amendment No. 3 to Master License Agreement between Syntroleum
Corporation and the Company dated July 1, 2003 (Incorporated by
reference to Exhibit 10.17 of Form 10-K filed with the Securities
and Exchange Commission on March 15, 2004)10.7
    
    
    Amended and Restated License Agreement dated December 8, 1997
between Ensyn Technologies Inc. and Ensyn Group, Inc. and as
amended on February 12, 1999 (Incorporated by reference to Exhibit
10.12 of Form 10-K filed with the Securities and Exchange
Commission on March 15, 2006)10.8
    
    
    Indemnification Agreements entered into during the first quarter of
2008 between Ivanhoe Energy Inc. and its executive officers and
directors (Incorporated by reference to Exhibit 10.16 of Form 10-K
filed with the Securities and Exchange Commission on March 17,
2008)
  130




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Exhibits10.9
    
    
    Employment Agreement dated May 2, 2007 between Ivanhoe Energy Inc.
and Michael Silverman (Incorporated by reference to Exhibit 10.17
of Form 10-K filed with the Securities and Exchange Commission on
March 17, 2008)10.10
    
    
    Asset Transfer Agreement dated July 11, 2008 between Ivanhoe Energy
Inc. and Talisman Energy Canada (Incorporated by reference to
Exhibit 10.1 of Form 10-Q filed with the Securities and Exchange
Commission on August 11, 2008)10.11
    
    
    Back-In Agreement dated July 11, 2008 between Ivanhoe Energy Inc.
and Talisman Energy Canada (Incorporated by reference to Exhibit
10.2 of Form 10-Q filed with the Securities and Exchange Commission
on August 11, 2008)10.12
    
    
    Cdn. $12.5 million Promissory Note in favour of Talisman Energy
Canada due December 31, 2008 (Incorporated by reference to Exhibit
10.1 of Form 10-Q filed with the Securities and Exchange Commission
on November 11, 2008)10.13
    
    
    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
(Incorporated by reference to Exhibit 10.2 of Form 10-Q filed with
the Securities and Exchange Commission on November 11, 2008)10.14
    
    
    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 (Incorporated by reference to
Exhibit 10.3 of Form 10-Q filed with the Securities and Exchange
Commission on November 11, 2008)10.15
    
    
    Pledge Agreement dated July 11, 2008 between Ivanhoe Energy Inc.
and Talisman Energy Canada (Incorporated by reference to Exhibit
10.4 of Form 10-Q filed with the Securities and Exchange Commission
on November 11, 2008)10.16
    
    
    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
(Incorporated by reference to Exhibit 10.24 of Form 10-K filed with
the Securities and Exchange Commission on March 16, 2009)10.17
    
    
    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 (Incorporated by reference
to Exhibit 10.25 of Form 10-K filed with the Securities and
Exchange Commission on March 16, 2009)10.18
    
    
    Stock Purchase Agreement dated June 16, 2009 among Ivanhoe Energy
Holdings Inc., Ivanhoe Energy Inc., Seneca South Midway LLC and
Seneca Resources Corporation (Incorporated by reference to Exhibit
10.1 of Form 10-Q filed with the Securities and Exchange Commission
on November 9, 2009)10.19
    
    
    Employment Agreement dated October 1, 2009 between Ivanhoe Energy
Inc. and Gerald D. Schiefelbein (Incorporated by reference to
Exhibit 10.1 of Form 8-K filed with the Securities and Exchange
Commission on November 17, 2009)10.20
    
    
    Employment Agreement dated October 1, 2009 between Ivanhoe Energy
Inc. and David A. Dyck14.1
    
    
    Code of Business Conduct and Ethics as amended November 2, 2007
(Incorporated by reference to Exhibit 14.1 of Form 10-K filed with
the Securities and Exchange Commission on March 17, 2008)
  131




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Exhibits21.1
    
    
    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, 2009
  132




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##### Table of Contents



SIGNATURES
  IVANHOE ENERGY INC.By:
    /s/ Robert M. FriedlandName:
    Robert M. FriedlandTitle:
    Chief Executive OfficerDated:  March 16, 2010  Signature
    
    Title
    
    Date/s/ ROBERT M. FRIEDLAND

Robert M. Friedland
    
    Executive Co-Chairman, President and Chief
Executive Officer
(Principal Executive Officer)
    
    March 16, 2010/s/ GERALD D. SHEIFELBEIN

Gerald D. Schiefelbein
    
    Chief Financial Officer 
(Principal
Financial and Accounting Officer)
    
    March 16, 2010/s/ A. ROBERT ABBOUD

A. Robert Abboud
    
    Independent Co-Chairman and Lead Director
    
    March 16, 2010/s/ HOWARD R. BALLOCH

Howard Balloch
    
    Director
    
    March 16, 2010/s/ ROBERT G. GRAHAM

Robert G. Graham
    
    Director
    
    March 16, 2010/s/ ROBERT A. PIRRAGLIA

Robert A. Pirraglia
    
    Director
    
    March 16, 2010/s/ BRIAN F. DOWNEY

Brian F. Downey
    
    Director
    
    March 16, 2010/s/ PETER G. MEREDITH

Peter G. Meredith
    
    Director
    
    March 16, 2010
  133




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EXHIBIT INDEX
 Exhibit No.
    
    Description3.1
    
    
    Articles of Ivanhoe Energy Inc. as amended to May 3, 2007 (Incorporated by reference to Exhibit 3.1
of Form 10-K filed with the Securities and Exchange Commission on March 17, 2008)3.2
    
    
    Bylaws of Ivanhoe Energy Inc. as amended May 15, 2001 and further amended March 8, 2007 (Incorporated
by reference to Exhibit 3.2 of Form 10-K filed with the Securities and Exchange Commission on 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 (Incorporated by reference to Exhibit 3.15 of Form 20-F filed with the
Securities and Exchange Commission on February 28, 2000)10.2
    
    
    Master License Agreement Amendment No. 1 dated October 11, 2000 between Syntroleum Corporation and
Ivanhoe Energy Inc. (Incorporated by reference to Exhibit 10.18 of Form 10-K filed with the
Securities and Exchange Commission on March 16, 2001)10.3
    
    
    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
(Incorporated by reference to Exhibit 10.12 of Form 10-K filed with the Securities and Exchange
Commission on March 19, 2003)10.4
    
    
    Employees and Directors Equity Incentive Plan as amended May 29, 200810.5
    
    
    Amendment No. 2 to Master License Agreement between Syntroleum Corporation and the Company dated June
1, 2002 (Incorporated by reference to Exhibit 10.6 of Form 10-K filed with the Securities and
Exchange Commission on March 15, 2006)10.6
    
    
    Amendment No. 3 to Master License Agreement between Syntroleum Corporation and the Company dated July
1, 2003 (Incorporated by reference to Exhibit 10.17 of Form 10-K filed with the Securities and
Exchange Commission on March 15, 2004)10.7
    
    
    Amended and Restated License Agreement dated December 8, 1997 between Ensyn Technologies Inc. and
Ensyn Group, Inc. and as amended on February 12, 1999 (Incorporated by reference to Exhibit 10.12 of
Form 10-K filed with the Securities and Exchange Commission on March 15, 2006)10.8
    
    
    Indemnification Agreements entered into during the first quarter of 2008 between Ivanhoe Energy Inc.
and its executive officers and directors (Incorporated by reference to Exhibit 10.16 of Form 10-K
filed with the Securities and Exchange Commission on March 17, 2008)10.9
    
    
    Employment Agreement, dated May 2, 2007 between Ivanhoe Energy Inc. and Michael Silverman
(Incorporated by reference to Exhibit 10.17 of Form 10-K filed with the Securities and Exchange
Commission on March 17, 2008)10.10
    
    
    Asset Transfer Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and Talisman Energy Canada
(Incorporated by reference to Exhibit 10.1 of Form 10-Q filed with the Securities and Exchange
Commission on August 11, 2008)10.11
    
    
    Back-In Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and Talisman Energy Canada
(Incorporated by reference to Exhibit 10.2 of Form 10-Q filed with the Securities and Exchange
Commission on August 11, 2008)10.12
    
    
    Cdn. $12.5 million Promissory Note in favour of Talisman Energy Canada due December 31, 2008
(Incorporated by reference to Exhibit 10.1 of Form 10-Q filed with the Securities and Exchange
Commission on November 11, 2008)10.13
    
    
    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 (Incorporated by reference to Exhibit 10.2 of Form 10-Q filed with the Securities and Exchange
Commission on November 11, 2008)10.14
    
    
    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 (Incorporated by reference to Exhibit 10.3
of Form 10-Q filed with the Securities and Exchange Commission on November 11, 2008)10.15
    
    
    Pledge Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and Talisman Energy Canada
(Incorporated by reference to Exhibit 10.4 of Form 10-Q filed with the Securities and Exchange
Commission on November 11, 2008)10.16
    
    
    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 (Incorporated by reference to
Exhibit 10.24 of Form 10-K filed with the Securities and Exchange Commission on March 16, 2009)
  134




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##### Table of Contents



Exhibit No.
    
    Description10.17
    
    
    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 Incorporated by
reference to Exhibit 10.25 of Form 10-K filed with the Securities and Exchange Commission on March
16, 2009)10.18
    
    
    Stock Purchase Agreement dated June 16, 2009 among Ivanhoe Energy Holdings Inc., Ivanhoe Energy Inc.,
Seneca South Midway LLC and Seneca Resources Corporation (Incorporated by reference to Exhibit 10.1
of Form 10-Q filed with the Securities and Exchange Commission on November 9, 2009)10.19
    
    
    Employment Agreement dated October 1, 2009 between Ivanhoe Energy Inc. and Gerald D. Schiefelbein
(Incorporated by reference to Exhibit 10.1 of Form 8-K filed with the Securities and Exchange
Commission on November 17, 2009)10.20
    
    
    Employment Agreement dated October 1, 2009 between Ivanhoe Energy Inc. and David A. Dyck14.1
    
    
    Code of Business Conduct and Ethics amended November 2, 2007 (Incorporated by reference to Exhibit
14.1 of Form 10-K filed with the Securities and Exchange Commission on March 17, 2008)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, 2009
  135