##### 



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, 2006
 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
    
    98-0372413(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)654-999 Canada PlaceVancouver, British Columbia, Canada
    
    V6C 3E1(Address of principal executive offices)
    
    (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 þ
  o þ
  þ o
 þ
  o þ o
  o þ
   Class
    
    Outstanding at March 8, 2007Common Shares, no par value
    
    241,254,394 shares
 DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
  
 PagePART IItems 1 and 2 Business and PropertiesGeneral
    
    
    4Corporate Strategy
    
    
    4Heavy to Light Oil Upgrading Technology
    
    
    5Gas-to-Liquids Technology
    
    
    6Oil and Gas Properties
    
    
    7Employees
    
    
    9Reserves, Production and Related Information
    
    
    9Item 1A Risk Factors
    
    
    11Item 1B Unresolved Staff Comments
    
    
    15Item 3 Legal Proceedings
    
    
    15Item 4 Submission of Matters to a Vote of Security Holders
    
    
    15PART IIItem 5 Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities
    
    
    16Item 6 Five Year Summary of Selected Financial Data
    
    
    18Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 7A Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 8 Financial Statements and Supplementary Data
    
    
    39Item 9 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    77Item 9A Controls and Procedures
    
    
    77Item 9B Other Information
    
    
    79PART IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    
    79Item 11 Executive Compensation
    
    
    81Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    88Item 13 Certain Relationships and Related Transactions, and Director Independence
    
    
    89Item 14 Principal Accounting Fees and Services
    
    
    89PART IVItem 15 Exhibits and Financial Statement Schedules
    
    
    91
 2




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##### 



CURRENCY AND EXCHANGE RATES
 dollars $ Cdn.$
 2006
    
    2005
    
    2004
    
    2003
    
    2002Closing
    
    $
    0.86
    
    
    $
    0.86
    
    
    $
    0.83
    
    
    $
    0.77
    
    
    $
    0.63Low
    
    $
    0.85
    
    
    $
    0.79
    
    
    $
    0.72
    
    
    $
    0.63
    
    
    $
    0.62High
    
    $
    0.91
    
    
    $
    0.87
    
    
    $
    0.85
    
    
    $
    0.77
    
    
    $
    0.66Average Noon
    
    $
    0.88
    
    
    $
    0.83
    
    
    $
    0.77
    
    
    $
    0.71
    
    
    $
    0.63
  ABBREVIATIONS
  Boe
    
    = barrel of oil equivalentBbl
    
    = barrelMBbl
    
    = thousand barrelsMMBbl
    
    = million barrelsMboe
    
    = thousands of barrels of oil equivalentBopd
    
    = barrels of oil per dayBbls/d
    
    = barrels per dayBoe/d
    
    = barrels of oil equivalent per dayMboe/d
    
    = thousands of barrels of oil equivalent per dayMBbls/d
    
    = thousand barrels per dayMMBls/d
    
    = million barrels per dayMMBtu
    
    = million British thermal unitsMcf
    
    = thousand cubic feetMMcf
    
    = million cubic feetMcf/d
    
    = thousand cubic feet per dayMMcf/d
    
    = million cubic feet per day
 equivalents
 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
  3




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##### 



AVAILABLE INFORMATION
 http://www.ivanhoe-energy.com/ http://www.sec.gov/
 
 ITEMS 1 AND 2 BUSINESS AND PROPERTIES
 
 GENERAL
     
 CORPORATE STRATEGY
 Importance of the Heavy Oil Segment of the Oil and Gas Industry
      Ivanhoes Value Proposition
 RTP TM Process HTL Technology HTL
 4




---



##### 



Implementation Strategies
  1.
    
    Build a portfolio of major HTL projects. We will continue to deploy our personnel and
our financial resources in support of our goal to capture opportunities for development
projects utilizing our HTL technology.2.
    
    Advance the technology. Additional development work will continue as we advance the
technology through the first commercial application and beyond.3.
    
    Enhance our financial position in anticipation of major projects. Implementation of
large projects requires significant capital outlays. We are refining our financing plans
and establishing the relationships required for the development activities that we see
ahead.4.
    
    Build internal capabilities in advance of major projects.The HTL technical team,
which includes our own staff, specialized consultants including the inventors of the
technology, and our enhanced oil recovery (EOR) team will be supplemented and expanded to
add additional expertise in areas such as project management.5.
    
    Build the relationships that we will need for the future.Commercialization of our
technologies demands close alignment with partners, suppliers, host governments and
financiers.6.
    
    Capture value from other company assets as we complete the transition to a heavy oil
focused company.Revenue from existing operations in California and China will be utilized
to fund growth of the business. Non-heavy oil related investment opportunities in our
portfolio will be leveraged to capture value and provide maximum return for the company.
 
 HEAVY TO LIGHT OIL UPGRADING TECHNOLOGY
 RTP TM License and Patents
 Ensyn TM
 5




---



##### 



Commercial Demonstration Facility
 CDF
    HTL Business Development
  o
 
 GAS-TO-LIQUIDS TECHNOLOGY
 Syntroleum License
 Syntroleum GTL Technology GTL Syntroleum Process TM
  6




---



##### 



GTL Business Development
 EGAS
 
 OIL AND GAS PROPERTIES
  United States
 
    
    Production and Development
 South Midway
   Other
  o
  7




---



##### 




    
    Exploration
  Knights Landing
   Aera Exploration Agreement
 AMI
 Other
  China
 
    
    Production and Development
 CNPC Dagang field
 Richfirst CITIC
 8




---



##### 



ODP
 WTI
 
    
    Exploration
 Zitong Contract
  Mitsubishi Zitong
Partners Phase 2
  
 EMPLOYEES
  
 RESERVES, PRODUCTION AND RELATED INFORMATION
   9




---



##### 



Average Sales Price
    
    Average Operating Costs2006
    
    2005
    
    2004
    
    2006
    
    2005
    
    2004Crude Oil and Natural Gas ($/Boe)U.S.
    
    $
    54.86
    
    
    $
    44.01
    
    
    $
    34.66
    
    
    $
    19.54
    
    
    $
    15.64
    
    
    $
    11.76China
    
    $
    62.04
    
    
    $
    49.97
    
    
    $
    36.11
    
    
    $
    20.58
    
    
    $
    8.27
    
    
    $
    8.14
  2006
    
    2005
    
    2004Oil Wells
    
    Gas Wells
    
    Oil Wells
    
    Gas Wells
    
    Oil Wells
    
    Gas WellsGross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetU.S.
    
    
    89
    
    
    
    73.5
    
    
    
    2
    
    
    
    1.0
    
    
    
    87
    
    
    
    69.3
    
    
    
    3
    
    
    
    1.5
    
    
    
    84
    
    
    
    67.2
    
    
    
    13
    
    
    
    11.7China
    
    
    42
    
    
    
    34.4
    (1)
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    21.2
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    10.3
    (1)
    
    
    
    
    
    
    
 
 (1)
    
    After giving effect to the 40% farm-in/out of Richfirst to the Dagang field.  Exploratory
 Productive Wells
    
    Dry Wells2006
    
    2005
    
    2004
    
    2006
    
    2005
    
    2004Oil
    
    Gas
    
    Oil
    
    Gas
    
    Oil
    
    Gas
    
    Oil
    
    Gas
    
    Oil
    
    Gas
    
    Oil
    
    GasU.S.
    
    
    
    
    
    
    
    
    
    
    1.5
    
    
    
    0.2
    
    
    
    0.4
    
    
    
    3.0
    
    
    
    0.6
    (1)
    
    
    
    
    
    
    
    
    
    
    1.8
    (2)
    
    
    1.4
    
    
    
    4.0China
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    1.5
    
    
    
    0.2
    
    
    
    0.4
    
    
    
    3.0
    
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    2.8
    
    
    
    1.4
    
    
    
    4.0
 
 (1)
    
    Includes 0.6 (1 gross) net exploratory wells drilled during 2005 which were determined to
be dry in 2006.(2)
    
    Includes 0.8 net (2 gross) exploratory wells drilled during 2001, which were determined to be
dry in 2005. Development
 Productive Wells
    
    Dry Wells2006
    
    2005
    
    2004
    
    2006
    
    2005
    
    2004Oil
    
    Gas
    
    Oil
    
    Gas
    
    Oil
    
    Gas
    
    Oil
    
    Gas
    
    Oil
    
    Gas
    
    Oil
    
    GasU.S.
    
    
    9.0
    
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    7.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    China
    
    
    
    
    
    
    
    
    
    
    10.8
    
    
    
    
    
    
    
    7.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    9.0
    
    
    
    
    
    
    
    11.8
    
    
    
    
    
    
    
    15.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
 Wells in Progress
   Developed Acres
    
    Undeveloped AcresGross
    
    Net
    
    Gross
    
    NetU.S.
    
    
    7,691
    
    
    
    4,428
    
    
    
    96,672
    
    
    
    29,373China (1)
    
    
    2,969
    
    
    
    2,435
    
    
    
    888,924
    
    
    
    883,306
 
 (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.  10




---



##### 



Our Share of
    
    
    Our Share ofBefore Tax Cash Flows
    
    
    After Tax Cash FlowsOur Share
    
    
    In Thousands of U.S. Dollars
    
    
    In Thousands of U.S. DollarsOil
    
    
    Gas
    
    
    Discounted at:
    
    
    Discounted at:(Mbbl)
    
    
    (MMcf)
    
    
    0%
    
    
    10%
    
    
    15%
    
    
    0%
    
    
    10%
    
    
    15%Net Proved
Reserves(1)U.S.
    
    
    1,220
    
    
    
    417
    
    
    $
    30,420
    
    
    $
    23,088
    
    
    $
    20,711
    
    
    $
    30,420
    
    
    $
    23,088
    
    
    $
    20,711China
    
    
    1,785
    
    
    
    
    
    
    
    53,497
    
    
    
    42,792
    
    
    
    38,887
    
    
    
    53,497
    
    
    
    42,792
    
    
    
    38,8873,005
    
    
    
    417
    
    
    $
    83,917
    
    
    $
    65,880
    
    
    $
    59,599
    
    
    $
    83,917
    
    
    $
    65,880
    
    
    $
    59,599
 
 (1)
    
    Net Proved Reserves are our share of the estimated quantities of crude oil which
geological and engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic conditions. See the Supplementary
Disclosures about Oil and Gas Production Activities, which follow the notes to our financial
statements set forth in Item 8 of this Annual Report on Form 10-K. Special Note to Canadian Investors
 SEC 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;
    
    the SEC mandates disclosure of proved reserves calculated using year-end constant prices
and costs only whereas NI 51-101 also requires disclosure of reserves and related future
net revenues using forecasted prices;
    
    the SEC mandates disclosure of proved and proved producing reserves by country only
whereas NI 51-101 requires disclosure of more reserve categories and product types;
    
    the SEC does not require separate disclosure of proved undeveloped reserves or related
future development costs whereas NI 51-101 requires disclosure of more information
regarding proved undeveloped reserves, related development plans and future development
costs; 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 and to file their reports.
  
 ITEM 1A. RISK FACTORS
  We may not be able to meet our substantial capital requirements.
  11




---



##### 



We might not successfully commercialize our technology, and commercial-scale HTL and GTL plants
based on our technology may never be successfully constructed or operated.
  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 technology could
become uncompetitive or obsolete.
  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.
   12




---



##### 



Lower oil prices could negatively impact our ability to borrow.
  Our ability to sell assets and replace revenues generated from any sale of our existing properties
depends upon market conditions and numerous uncertainties.
  We may be required to take write-downs if oil prices decline, our estimated development costs
increase or our exploration results deteriorate.
  Government regulations in foreign countries may limit our activities and harm our business
operations.
  Estimates of proved reserves and future net revenue may change if the assumptions on which such
estimates are based prove to be inaccurate.
  13




---



##### 



Information in this document regarding our future plans reflects our current intent and is subject
to change.
   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.
   Complying with environmental and other government regulations could be costly and could negatively
impact our production.
  14




---



##### 



We compete for oil and gas properties with many other exploration and development companies
throughout the world who have access to greater resources.
  Our share ownership is highly concentrated and, as a result, our principal shareholder
significantly influences 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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  15




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##### 



PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES
 Market Information
  NASDAQ CAPITAL MARKET (IVAN)
(U.S.$)
 2006
    
    20054th Qtr
    
    3rd Qtr
    
    2nd Qtr
    
    1st Qtr
    
    4th Qtr
    
    3rd Qtr
    
    2nd Qtr
    
    1st QtrHigh
    
    
    1.65
    
    
    
    2.43
    
    
    
    2.96
    
    
    
    3.27
    
    
    
    2.00
    
    
    
    2.50
    
    
    
    2.95
    
    
    
    3.34Low
    
    
    1.18
    
    
    
    1.40
    
    
    
    2.26
    
    
    
    1.25
    
    
    
    0.99
    
    
    
    1.97
    
    
    
    1.98
    
    
    
    2.04
 TORONTO STOCK EXCHANGE (IE)
(CDN$)
 2006
    
    20054th Qtr
    
    3rd Qtr
    
    2nd Qtr
    
    1st Qtr
    
    4th Qtr
    
    3rd Qtr
    
    2nd Qtr
    
    1st QtrHigh
    
    
    1.89
    
    
    
    2.72
    
    
    
    3.31
    
    
    
    3.75
    
    
    
    2.32
    
    
    
    3.06
    
    
    
    3.60
    
    
    
    4.02Low
    
    
    1.36
    
    
    
    1.59
    
    
    
    2.50
    
    
    
    1.44
    
    
    
    1.16
    
    
    
    2.30
    
    
    
    2.52
    
    
    
    2.52
  Exemptions from Certain NASDAQ Marketplace Rules
   Enforceability of Civil Liabilities
  16




---



##### 



Holders of Common Shares
  Dividends
 Yukon Business Corporations Act
 Exchange Controls and Taxation
  Investment Canada Act Investment Act Canadian WTO investor
 Income Tax Act Convention
 Sales of Unregistered Securities
 Act
 
    
    in February 2006, we issued 8,591,434 shares in exchange for an additional 40% working
interest in the Dagang field to CITIC in a transaction exempt from registration under Rule
903 of the Act;
    
    in March 2006, we issued 100 common shares at a price of U.S.$3.20 to an institutional
investor pursuant to the exercise of previously issued share purchase warrants in a
transaction exempt from registration under Rule 903 of the Act;
 17




---



##### 




    
    in April 2006, we issued 11,400,000 special warrants at U.S.$2.23 per special warrant to
institutional and individual investors in a transaction exempt from registration under Rule
903 of the Act. Each special warrant was exercised to acquire, for no additional
consideration, one common share and one share purchase warrant following the issuance of a
receipt for a prospectus by applicable Canadian securities regulatory authorities, which
occurred in May 2006. Originally, one common share purchase warrant would entitle the
holder to purchase one common share at a price of U.S.$2.63 exercisable until the fifth
anniversary date of the special warrant date of issue. In September 2006 these warrants
were listed on the Toronto Stock Exchange and the exercise price was changed to Cdn.$2.93.
 
 ITEM 6. FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
 GAAP
  December 312006
    
    2005
    
    2004
    
    2003
    
    2002(stated in thousands of US dollars, except per share amounts)Financial PositionTotal assets
    
    
    248,544
    
    
    
    240,877
    
    
    
    118,486
    
    
    
    106,574
    
    
    
    107,088Long-term debt
    
    
    4,237
    
    
    
    4,972
    
    
    
    2,639
    
    
    
    833
    
    
    NilShareholders equity
    
    
    228,386
    
    
    
    204,767
    
    
    
    103,586
    
    
    
    100,537
    
    
    
    100,548Common shares outstanding (in thousands)
    
    
    241,216
    
    
    
    220,779
    
    
    
    169,665
    
    
    
    161,359
    
    
    
    144,466Capital investments
    
    
    17,842
    
    
    
    43,282
    
    
    
    46,454
    
    
    
    15,391
    
    
    
    18,828Results of OperationsRevenues
    
    
    48,100
    
    
    
    29,939
    
    
    
    17,997
    
    
    
    9,659
    
    
    
    8,437Net loss
    
    
    (25,492
    )(1)
    
    
    (13,512
    )(1)
    
    
    (20,725
    )(1)
    
    
    (30,179
    )(1)
    
    
    (7,130
    )(1)Net loss per share  basic and diluted
    
    
    (0.11
    )
    
    
    (0.07
    )
    
    
    (0.12
    )
    
    
    (0.20
    )
    
    
    (0.05
    )
 
 (1)
    
    Includes asset write-downs and provisions for impairment of $5.4 million, $5.6 million,
$16.6 million, $23.3 million and $2.4 million for 2006, 2005, 2004, 2003 and 2002,
respectively. See Note 4 to our financial statements under Item 8 in this Annual Report on
Form 10-K. Reconciliation to U.S. GAAP
  
    
    adjustment for the reduction in stated capital in 1999,
    
    increase in the ascribed value of shares issued for the acquisition of U.S. royalty interests in 1999 and 2000,
    
    net additional impairment provision for our China oil and gas properties in 2001,
2005 and 2006, net of depletion expense,
 18




---



##### 




    
    net additional impairment provision for our U.S. oil and gas properties in 2004, 2005
and 2006, net of depletion expense,
    
    net additional expense from 2001 to 2006 in connection with development costs for our
GTL and HTL projects, and
    
    reduction in the net losses from 2002 to 2005 for stock based compensation accounted
for under the intrinsic value method for U.S. GAAP.
   December 3120052006
    
    (as restated)
    
    2004
    
    2003
    
    2002(stated in thousands of US dollars, except per share amounts)Financial PositionTotal assets
    
    
    216,365
    
    
    
    224,935
    
    
    
    105,791
    
    
    
    94,024
    
    
    
    91,921Shareholders equity  as originally reported
    
    
    188,829
    
    
    
    188,825
    
    
    
    90,892
    
    
    
    87,987
    
    
    
    85,279Prior period adjustment
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    
    
    
    
    Shareholders equity  as restated
    
    
    188,829
    
    
    
    188,745
    
    
    
    90,892
    
    
    
    87,987
    
    
    
    85,279Results of OperationsNet loss  as originally reported
    
    
    (42,422
    )
    
    
    (14,972
    )
    
    
    (19,696
    )
    
    
    (27,086
    )
    
    
    (8,202
    )Prior period adjustment
    
    
    
    
    
    
    2,866
    
    
    
    
    
    
    
    
    
    
    
    Net loss  as restated
    
    
    (42,422
    )
    
    
    (12,106
    )
    
    
    (19,696
    )
    
    
    (27,086
    )
    
    
    (8,202
    )Net loss per share  basic and diluted
    
    
    (0.18
    )
    
    
    (0.07
    )
    
    
    (0.12
    )
    
    
    (0.18
    )
    
    
    (0.06
    )Prior period adjustment
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    
    
    
    
    Net loss per share  as restated
    
    
    (0.18
    )
    
    
    (0.06
    )
    
    
    (0.12
    )
    
    
    (0.18
    )
    
    
    (0.06
    )
 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 TABLE OF CONTENTS
 PageIvanhoe Energys Business
    
    
    20Executive Overview of 2006 Results
    
    
    20Financial Results  Year to Year Change in Net Loss
    
    
    21Net Operating Revenues
    
    
    21General and Administrative
    
    
    25Business and Technology Development
    
    
    26Write-off of Deferred Acquisition Costs
    
    
    27Net Interest
    
    
    27Depletion and Depreciation
    
    
    27Write-Down of GTL and HTL Investments
    
    
    28Impairment of Oil and Gas Properties
    
    
    28Financial Condition, Liquidity and Capital Resources
    
    
    29Contractual Obligations and Commitments
    
    
    30Critical Accounting Principles and Estimates
    
    
    31Impact of New and Pending Canadian GAAP Accounting Standards
    
    
    34Impact of New and Pending U.S. GAAP Accounting Standards
    
    
    35Off Balance Sheet Arrangements
    
    
    36Related Party Transactions
    
    
    36Certain Factors Affecting the Business
    
    
    37
   19




---



##### 



Ivanhoe Energys Business
 RTP TM Process HTL Technology HTL EOR E&P GTL Technology GTL
   
 Executive Overview of 2006 Results
    Year ended December 31,2006
    
    2005
    
    2004Oil and gas revenue
    
    $
    47,748
    
    
    $
    29,800
    
    
    $
    17,795Net loss
    
    $
    (25,492
    )
    
    $
    (13,512
    )
    
    $
    (20,725
    )Net loss per share
    
    $
    (0.11
    )
    
    $
    (0.07
    )
    
    $
    (0.12
    )Average production (Boe/d)
    
    
    2,178
    
    
    
    1,738
    
    
    
    1,376Net operating revenue per Boe
    
    $
    60.06
    
    
    $
    46.97
    
    
    $
    35.34Capital investments
    
    $
    17,842
    
    
    $
    43,282
    
    
    $
    46,454Cash flow from operating activities
    
    $
    14,352
    
    
    $
    9,870
    
    
    $
    4,032
 20




---



##### 



Financial Results  Year to Year Change in Net Loss
  Favorable
    
    
    
    
    
    
    
    
    Favorable(Unfavorable)
    
    
    
    
    
    
    
    
    (Unfavorable)2006
    
    
    
    Variances
    
    
    
    2005
    
    
    
    Variances
    
    
    
    2004Summary of Net Loss by Significant Components:Cash Items:Net operating revenues:Oil and Gas Revenues:
    
    $
    47,748
    
    
    
    
    
    
    
    
    $
    29,800
    
    
    
    
    
    
    
    
    $
    17,795Production volumes
    
    
    
    
    
    
    $
    8,888
    
    
    
    
    
    
    
    
    $
    4,334Oil and gas prices
    
    
    
    
    
    
    
    9,060
    
    
    
    
    
    
    
    
    
    7,671Realized gain on derivative instruments
    
    
    69
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Less: Operating costs
    
    
    (16,133
    )
    
    
    
    (8,530
    )
    
    
    
    (7,603
    )
    
    
    
    (2,530
    )
    
    
    
    (5,073
    )Total net operating revenues
    
    
    31,684
    
    
    
    
    9,487
    
    
    
    
    22,197
    
    
    
    
    9,475
    
    
    
    
    12,722General and administrative, less
stock based compensation
    
    
    (7,648
    )
    
    
    
    (60
    )
    
    
    
    (7,588
    )
    
    
    
    (1,589
    )
    
    
    
    (5,999
    )Business and technology development,
less stock based compensation
    
    
    (7,221
    )
    
    
    
    (2,416
    )
    
    
    
    (4,805
    )
    
    
    
    (2,893
    )
    
    
    
    (1,912
    )Acquisition costs
    
    
    (736
    )
    
    
    
    (736
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net interest
    
    
    (29
    )
    
    
    
    982
    
    
    
    
    (1,011
    )
    
    
    
    (881
    )
    
    
    
    (130
    )Total Cash Variances
    
    
    16,050
    
    
    
    
    7,257
    
    
    
    
    8,793
    
    
    
    
    4,112
    
    
    
    
    4,681Non-Cash Items:Unrealized loss on derivative instruments
    
    
    (493
    )
    
    
    
    (493
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depletion and depreciation
    
    
    (32,550
    )
    
    
    
    (18,103
    )
    
    
    
    (14,447
    )
    
    
    
    (6,965
    )
    
    
    
    (7,482
    )Stock based compensation
    
    
    (2,921
    )
    
    
    
    (808
    )
    
    
    
    (2,113
    )
    
    
    
    (837
    )
    
    
    
    (1,276
    )Write-downs of HTL and GTL investments
    
    
    
    
    
    
    
    636
    
    
    
    
    (636
    )
    
    
    
    (386
    )
    
    
    
    (250
    )Impairment of oil and gas properties
    
    
    (5,420
    )
    
    
    
    (420
    )
    
    
    
    (5,000
    )
    
    
    
    11,350
    
    
    
    
    (16,350
    )Other
    
    
    (158
    )
    
    
    
    (49
    )
    
    
    
    (109
    )
    
    
    
    (61
    )
    
    
    
    (48
    )Total Non-Cash Variances
    
    
    (41,542
    )
    
    
    
    (19,237
    )
    
    
    
    (22,305
    )
    
    
    
    3,101
    
    
    
    
    (25,406
    )Net Loss
    
    $
    (25,492
    )
    
    
    $
    (11,980
    )
    
    
    $
    (13,512
    )
    
    
    $
    7,213
    
    
    
    $
    (20,725
    )
    
 Net Operating Revenues
  21




---



##### 



Years ended December 31,
    
    Years ended December 31,Net Boes
    
    Percentage
    
    Net Boes
    
    Percentage2006
    
    2005
    
    Change
    
    2005
    
    2004
    
    ChangeChina:Dagang
    
    
    554,185
    
    
    
    282,582
    
    
    
    96
    %
    
    
    282,582
    
    
    
    190,309
    
    
    
    48
    %Daqing
    
    
    20,946
    
    
    
    32,236
    
    
    
    -35
    %
    
    
    32,236
    
    
    
    44,626
    
    
    
    -28
    %575,131
    
    
    
    314,818
    
    
    
    83
    %
    
    
    314,818
    
    
    
    234,935
    
    
    
    34
    %U.S.:South Midway
    
    
    188,379
    
    
    
    196,428
    
    
    
    -4
    %
    
    
    196,428
    
    
    
    183,875
    
    
    
    7
    %Spraberry
    
    
    23,242
    
    
    
    27,940
    
    
    
    -17
    %
    
    
    27,940
    
    
    
    33,498
    
    
    
    -17
    %Citrus
    
    
    4,733
    
    
    
    34,257
    
    
    
    -86
    %
    
    
    34,257
    
    
    
    31,008
    
    
    
    10
    %Knights Landing
    
    
    237
    
    
    
    57,106
    
    
    
    -100
    %
    
    
    57,106
    
    
    
    14,786
    
    
    
    286
    %Others
    
    
    3,339
    
    
    
    3,943
    
    
    
    -15
    %
    
    
    3,943
    
    
    
    5,447
    
    
    
    -28
    %219,930
    
    
    
    319,674
    
    
    
    -31
    %
    
    
    319,674
    
    
    
    268,614
    
    
    
    19
    %795,061
    
    
    
    634,492
    
    
    
    25
    %
    
    
    634,492
    
    
    
    503,549
    
    
    
    26
    %
      China
    
    Production Volumes 2006 vs. 2005
   
    
    Production Volumes 2005 vs. 2004
  22




---



##### 




    
    Operating Costs 2006 vs. 2005
  PRC Windfall Levy Measures Windfall Levy
 
    
    Operating Costs 2005 vs. 2004
  U.S.
    
    Production Volumes 2006 vs. 2005
   
    
    Production Volumes 2005 vs. 2004
   23




---



##### 




    
    Operating Costs 2006 vs. 2005
  
    
    Operating Costs 2005 vs. 2004
    Year ended December 31,2006
    
    
    2005
    
    
    2004U.S.
    
    
    China
    
    
    Total
    
    
    U.S.
    
    
    China
    
    
    Total
    
    
    U.S.
    
    
    China
    
    
    TotalNet Production:Boe
    
    
    219,930
    
    
    
    575,131
    
    
    
    795,061
    
    
    
    319,674
    
    
    
    314,818
    
    
    
    634,492
    
    
    
    268,614
    
    
    
    234,935
    
    
    
    503,549Boe/day for the year
    
    
    603
    
    
    
    1,576
    
    
    
    2,178
    
    
    
    876
    
    
    
    863
    
    
    
    1,738
    
    
    
    734
    
    
    
    642
    
    
    
    1,376
 Per Boe
    
    
    Per Boe
    
    
    Per BoeOil and gas revenue
    
    $
    54.86
    
    
    $
    62.04
    
    
    $
    60.06
    
    
    $
    44.01
    
    
    $
    49.97
    
    
    $
    46.97
    
    
    $
    34.66
    
    
    $
    36.11
    
    
    $
    35.34Field operating costs
    
    
    14.44
    
    
    
    14.07
    
    
    
    14.17
    
    
    
    11.44
    
    
    
    7.49
    
    
    
    9.48
    
    
    
    8.94
    
    
    
    6.04
    
    
    
    7.59Production tax and
Windfall Levy
    
    
    1.15
    
    
    
    5.74
    
    
    
    4.47
    
    
    
    0.83
    
    
    
    
    
    
    
    0.42
    
    
    
    0.44
    
    
    
    
    
    
    
    0.23Engineering support
    
    
    3.95
    
    
    
    0.77
    
    
    
    1.65
    
    
    
    3.37
    
    
    
    0.78
    
    
    
    2.08
    
    
    
    2.38
    
    
    
    2.10
    
    
    
    2.2519.54
    
    
    
    20.58
    
    
    
    20.29
    
    
    
    15.64
    
    
    
    8.27
    
    
    
    12.00
    
    
    
    11.76
    
    
    
    8.14
    
    
    
    10.07Net operating revenue
    
    
    35.32
    
    
    
    41.46
    
    
    
    39.77
    
    
    
    28.37
    
    
    
    41.70
    
    
    
    34.99
    
    
    
    22.90
    
    
    
    27.97
    
    
    
    25.27Depletion
    
    
    24.23
    
    
    
    40.57
    
    
    
    36.05
    
    
    
    15.53
    
    
    
    29.77
    
    
    
    22.60
    
    
    
    16.80
    
    
    
    12.18
    
    
    
    14.64$
    11.09
    
    
    $
    0.89
    
    
    $
    3.72
    
    
    $
    12.84
    
    
    $
    11.93
    
    
    $
    12.39
    
    
    $
    6.10
    
    
    $
    15.79
    
    
    $
    10.63
 24




---



##### 



General and Administrative
  2006 vs.
    
    
    2005 vs.2005
    
    
    2004Favorable (unfavorable) variances:Oil and Gas Activities:China
    
    $
    739
    
    
    $
    (1,116
    )U.S.
    
    
    (498
    )
    
    
    (188
    )Corporate
    
    
    (892
    )
    
    
    (950
    )(651
    )
    
    
    (2,254
    )Less: stock based compensation
    
    
    591
    
    
    
    665$
    (60
    )
    
    $
    (1,589
    )
 
    
    General and Administrative 2006 vs. 2005China
  U.S.
  Corporate
 SOX
 25




---



##### 




    
    General and Administrative 2005 vs. 2004China
  U.S.
  Corporate
  
 Business and Technology Development
  2006 vs.
    
    
    2006 vs.2005
    
    
    2005Favorable (unfavorable) variances:HTL
    
    $
    (2,506
    )
    
    $
    (3,229
    )GTL
    
    
    (127
    )
    
    
    164(2,633
    )
    
    
    (3,065
    )Less: stock based compensation
    
    
    217
    
    
    
    172$
    (2,416
    )
    
    $
    (2,893
    )
 
    
    Business and Technology Development 2006 vs. 2005
  
    
    Business and Technology Development 2005 vs. 2004
  26




---



##### 



Write-off of Deferred Acquisition Costs
 CMA
 
 Net Interest
 
    
    Net Interest 2006 vs. 2005
  
    
    Net Interest 2005 vs. 2004
  
 Depletion and Depreciation
  
    
    Depletion and Depreciation 2006 vs. 2005
  China
  
    
    We suspended new drilling activity in December 2005 at our Dagang field in order to
assess production decline performances on recently drilled wells, as well as maximizing
cash flow from these operations. As a result, we reduced our estimate of the overall
development program and our independent engineering evaluators, GLJ Petroleum Consultants
Ltd., revised downward their estimate of our proved reserves at December 31, 2005.
    
    In the second quarter of 2005, we impaired the cost of our first Zitong block
exploration well resulting in $12.5 million of those and other associated costs being
included with our proved properties and therefore subject to depletion.
  U.S.
  27




---



##### 



HTL
  
    
    Depletion and Depreciation 2005 vs. 2004
  China
   U.S.
  
 Write-Down of HTL and GTL Investments
  
    
    Write-Down of HTL and GTL Investments 2006 vs. 2005
  
    
    Write-Down of HTL and GTL Investments 2005 vs. 2004
  
 Impairment of Oil and Gas Properties
  28




---



##### 




    
    Impairment of Oil and Gas Properties 2006 vs. 2005
  
    
    Impairment of Oil and Gas Properties 2005 vs. 2004
   
 Financial Condition, Liquidity and Capital Resources
 Sources and Uses of Cash
  
    
    Operating Activities
  
    
    Investing Activities
   29




---



##### 




    
    Financing Activities
     Outlook for 2007
  
 Contractual Obligations and Commitments
  30




---



##### 



Payments Due by Year(stated in thousands of U.S. dollars)Total
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    After 2010Consolidated Balance Sheets:Note payable  current portion (Note 6)
    
    $
    2,147
    
    
    $
    2,147
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Long term debt (Note 6)
    
    
    4,237
    
    
    
    
    
    
    
    3,825
    
    
    
    412
    
    
    
    
    
    
    
    Asset retirement obligation (Note 7)
    
    
    1,953
    
    
    
    
    
    
    
    742
    
    
    
    17
    
    
    
    484
    
    
    
    710Long term obligation (Note 8)
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    
    
    
    
    Other Commitments:Interest payable (1)
    
    
    653
    
    
    
    437
    
    
    
    212
    
    
    
    4
    
    
    
    
    
    
    
    Lease commitments (Note 8)
    
    
    3,990
    
    
    
    998
    
    
    
    970
    
    
    
    776
    
    
    
    651
    
    
    
    595Zitong exploration commitment (Note 8)
    
    
    906
    
    
    
    906
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    15,786
    
    
    $
    4,488
    
    
    $
    5,749
    
    
    $
    3,109
    
    
    $
    1,135
    
    
    $
    1,305
 
 (1)
    
    This is the estimated future interest payments on our notes payable and long term debt
using the rates of interest in effect as at December 31, 2006.  
 Critical Accounting Principles and Estimates
    Full Cost Accounting AcG
16
   Oil and Gas Reserves
 31




---



##### 




    
    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. In 2006, oil and gas depletion of $28.7 million was recorded in depletion and
depreciation expense. If our reserve estimates changed by 10%, our depletion and
depreciation expense for 2006 would have changed by approximately $2.6 million assuming no
other changes to our reserve profile. See Depletion below.
    
    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.
    Proved Probable
 Depletion 
   Impairment of Proved Oil and Gas Properties 
 ceiling test (1)
 32




---



##### 



(1)
  Asset Retirement  CICA
  Research and Development 
  33




---



##### 



Intangible Assets  TM Process TM Process
  Derivative Instruments  AcG13
 SFAS 133
 
 Impact of New and Pending Canadian GAAP Accounting Standards
 S.1535 S.3862 S.3863
 34




---



##### 



S.1506
   S.1530 S.3855 S.3865
 
 Impact of New and Pending U.S. GAAP Accounting Standards
 FASB SFAS No. 159
  SAB 108
 SFAS No. 157
 35




---



##### 



FIN 48
 SFAS No. 155
 SFAS No. 154
  
 Off Balance Sheet Arrangements
  
 Related Party Transactions
  36




---



##### 



Certain Factors Affecting the Business
 Competition
  Environmental Regulations
    Environmental Provisions
  Government Regulations
  37




---



##### 



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Equity Market Risks
   Commodity Price Risk
   (1)
  Foreign Currency Rate Risk
   Interest Rate Risk
  38




---



##### 



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Index to Financial Statements and Related Information
 PageReport of Independent Registered Chartered Accountants
    
    
    40Consolidated Financial StatementsConsolidated Balance Sheets
    
    
    41Consolidated Statements of Operations
    
    
    42Consolidated Statements of Shareholders Equity
    
    
    43Consolidated Statements of Cash Flow
    
    
    44Notes to the Consolidated Financial Statements
    
    
    45Quarterly Financial Data in Accordance with Canadian and U.S. GAAP (Unaudited).
    
    
    73Supplementary Disclosures About Oil and Gas Production Activities (Unaudited)
    
    
    73
 39




---



##### 



REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
 Ivanhoe Energy Inc.:
      
 COMMENTS BY INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS ON CANADA 
UNITED STATES OF AMERICA REPORTING DIFFERENCES
  
 40




---



##### 



IVANHOE ENERGY INC.
 
 Consolidated Balance Sheets
  As at December 31,2006
    
    
    2005AssetsCurrent AssetsCash and cash equivalents
    
    $
    13,879
    
    
    $
    6,724Accounts receivable (net of allowance for doubtful accounts of
$116 and $83 as at December 31, 2006 and 2005, respectively)
(Note 3)
    
    
    7,435
    
    
    
    9,994Prepaid and other current assets
    
    
    773
    
    
    
    33822,087
    
    
    
    17,056Oil and gas properties and investments, net (Note 4)
    
    
    121,918
    
    
    
    119,654Intangible assets  technology (Note 5)
    
    
    102,153
    
    
    
    102,068Long term assets
    
    
    2,386
    
    
    
    2,099$
    248,544
    
    
    $
    240,877Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    $
    9,428
    
    
    $
    25,791Notes payable  current portion (Note 6)
    
    
    2,147
    
    
    
    1,667Asset retirement obligations  current portion (Note 7)
    
    
    
    
    
    
    950Derivative instruments (Note 13)
    
    
    493
    
    
    
    12,068
    
    
    
    28,408Notes payable (Note 6)
    
    
    4,237
    
    
    
    4,972Asset retirement obligations (Note 7)
    
    
    1,953
    
    
    
    830Long term obligation (Note 8)
    
    
    1,900
    
    
    
    1,900Commitments and contingencies (Note 8)Going concern and basis of presentation (Note 2)Shareholders EquityShare capital, issued and outstanding 241,215,798 common shares;
December 31, 2005 220,779,335 common shares
    
    
    318,725
    
    
    
    291,088Purchase warrants (Note 9)
    
    
    23,955
    
    
    
    5,150Contributed surplus
    
    
    6,489
    
    
    
    3,820Accumulated deficit
    
    
    (120,783
    )
    
    
    (95,291
    )228,386
    
    
    
    204,767$
    248,544
    
    
    $
    240,877
  Approved by the Board:
 (signed) David R. Martin 
Director
    
    (signed) Brian Downey
Director
 41




---



##### 



IVANHOE ENERGY INC.
 
 Consolidated Statements of Operations
  Year Ended December 31,2006
    
    
    2005
    
    
    2004RevenueOil and gas revenue
    
    $
    47,748
    
    
    $
    29,800
    
    
    $
    17,795Loss on derivative instruments (Note 13)
    
    
    (424
    )
    
    
    
    
    
    
    Interest income
    
    
    776
    
    
    
    139
    
    
    
    20248,100
    
    
    
    29,939
    
    
    
    17,997ExpensesOperating costs
    
    
    16,133
    
    
    
    7,603
    
    
    
    5,073General and administrative
    
    
    10,180
    
    
    
    9,529
    
    
    
    7,275Business and technology development
    
    
    7,610
    
    
    
    4,978
    
    
    
    1,913Depletion and depreciation
    
    
    32,550
    
    
    
    14,447
    
    
    
    7,482Interest expense and financing costs
    
    
    963
    
    
    
    1,258
    
    
    
    379Write off of deferred acquisition costs (Note 18)
    
    
    736
    
    
    
    
    
    
    
    Write-downs and provision for impairment (Notes 4)
    
    
    5,420
    
    
    
    5,636
    
    
    
    16,60073,592
    
    
    
    43,451
    
    
    
    38,722Net Loss
    
    $
    (25,492
    )
    
    $
    (13,512
    )
    
    $
    (20,725
    )Net Loss per share  Basic and Diluted(Note 15)
    
    $
    (0.11
    )
    
    $
    (0.07
    )
    
    $
    (0.12
    )Weighted Average Number of Shares (in thousands)
    
    
    235,640
    
    
    
    195,803
    
    
    
    167,612
  42




---



##### 



IVANHOE ENERGY INC.
 
 Consolidated Statements of Shareholders Equity
  Share Capital
    
    
    Purchase
    
    
    Contributed
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Warrants
    
    
    Surplus
    
    
    Deficit
    
    
    Total(thousands)Balance December 31, 2003
    
    
    161,359
    
    
    $
    161,075
    
    
    $
    
    
    
    $
    516
    
    
    $
    (61,054
    )
    
    $
    100,537Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,725
    )
    
    
    (20,725
    )Shares issued for:Private placements, net of share
issue costs (Note 9)
    
    
    7,173
    
    
    
    20,428
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,428Exercise of options (Note 10)
    
    
    975
    
    
    
    1,767
    
    
    
    
    
    
    
    (44
    )
    
    
    
    
    
    
    1,723Services
    
    
    158
    
    
    
    347
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    347Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,276
    
    
    
    
    
    
    
    1,276Balance December 31, 2004
    
    
    169,665
    
    
    
    183,617
    
    
    
    
    
    
    
    1,748
    
    
    
    (81,779
    )
    
    
    103,586Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,512
    )
    
    
    (13,512
    )Shares and purchase warrants issued for:Merger, net of share issue costs (Note 18)
    
    
    30,000
    
    
    
    74,907
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,907Private placements, net of share
issue costs (Note 9)
    
    
    13,842
    
    
    
    21,834
    
    
    
    4,837
    
    
    
    
    
    
    
    
    
    
    
    26,671Refinance of convertible debt (Note 6 and 9)
    
    
    2,454
    
    
    
    4,000
    
    
    
    313
    
    
    
    
    
    
    
    
    
    
    
    4,313Exercise of purchase warrants (Note 9)
    
    
    4,515
    
    
    
    6,133
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,133Exercise of options (Note 10)
    
    
    111
    
    
    
    156
    
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    115Services
    
    
    192
    
    
    
    441
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    441Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,113
    
    
    
    
    
    
    
    2,113Balance December 31, 2005
    
    
    220,779
    
    
    
    291,088
    
    
    
    5,150
    
    
    
    3,820
    
    
    
    (95,291
    )
    
    
    204,767Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,492
    )
    
    
    (25,492
    )Shares and purchase warrants issued for:Acquisition of oil and gas assets (Note 18)
    
    
    8,591
    
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000Private placements, net of
share issue costs (Note 9)
    
    
    11,400
    
    
    
    6,493
    
    
    
    18,805
    
    
    
    
    
    
    
    
    
    
    
    25,298Exercise of options (Note 10)
    
    
    297
    
    
    
    743
    
    
    
    
    
    
    
    (252
    )
    
    
    
    
    
    
    491Services
    
    
    149
    
    
    
    401
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    401Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,921
    
    
    
    
    
    
    
    2,921Balance December 31, 2006
    
    
    241,216
    
    
    $
    318,725
    
    
    $
    23,955
    
    
    $
    6,489
    
    
    $
    (120,783
    )
    
    $
    228,386
  43




---



##### 



IVANHOE ENERGY INC.
 
 Consolidated Statements of Cash Flow
  Year Ended December 31,2006
    
    
    2005
    
    
    2004Operating ActivitiesNet loss
    
    $
    (25,492
    )
    
    $
    (13,512
    )
    
    $
    (20,725
    )Items not requiring use of cash:Depletion and depreciation
    
    
    32,550
    
    
    
    14,447
    
    
    
    7,482Write-down and provision for impairment (Notes 4)
    
    
    5,420
    
    
    
    5,636
    
    
    
    16,600Stock based compensation (Note 10)
    
    
    2,921
    
    
    
    2,113
    
    
    
    1,276Write off of deferred acquisition costs (Note 18)
    
    
    736
    
    
    
    
    
    
    
    Unrealized loss on derivative instruments (Note 13)
    
    
    
    
    
    
    
    
    
    
    Write off of debt financing costs
    
    
    
    
    
    
    857
    
    
    
    Other
    
    
    600
    
    
    
    108
    
    
    
    47Changes in non-cash working capital items (Note 16)
    
    
    (2,876
    )
    
    
    221
    
    
    
    (648
    )14,352
    
    
    
    9,870
    
    
    
    4,032Investing ActivitiesCapital investments
    
    
    (17,842
    )
    
    
    (43,282
    )
    
    
    (46,454
    )Merger, net of working capital (Note 18)
    
    
    
    
    
    
    (10,096
    )
    
    
    Merger and acquisition related costs (Note 18)
    
    
    (736
    )
    
    
    (1,712
    )
    
    
    (5,016
    )Acquisition of joint venture interest (Note 18)
    
    
    
    
    
    
    (6,750
    )
    
    
    Proceeds from sale of assets (Note 4)
    
    
    5,950
    
    
    
    
    
    
    
    13,958Advance payments
    
    
    (125
    )
    
    
    (1,200
    )
    
    
    Other
    
    
    (116
    )
    
    
    (97
    )
    
    
    (410
    )Changes in non-cash working capital items (Note 16)
    
    
    (12,708
    )
    
    
    12,022
    
    
    
    3,264(25,577
    )
    
    
    (51,115
    )
    
    
    (34,658
    )Financing ActivitiesShares issued on private placements, net of share issue costs
(Note 9)
    
    
    25,298
    
    
    
    26,671
    
    
    
    20,428Proceeds from exercise of options and warrants (Notes 9 and 10)
    
    
    491
    
    
    
    6,248
    
    
    
    1,723Share issue costs on shares issued for Merger
    
    
    
    
    
    
    (93
    )
    
    
    Proceeds from debt obligations, net of financing costs (Note 6)
    
    
    1,280
    
    
    
    8,000
    
    
    
    14,000Payments of debt obligations (Note 6)
    
    
    (8,689
    )
    
    
    (1,667
    )
    
    
    (10,694
    )Other
    
    
    
    
    
    
    (512
    )
    
    
    18,380
    
    
    
    38,647
    
    
    
    25,457Increase (decrease) in cash and cash equivalents, for the period
    
    
    7,155
    
    
    
    (2,598
    )
    
    
    (5,169
    )Cash and cash equivalents, beginning of year
    
    
    6,724
    
    
    
    9,322
    
    
    
    14,491Cash and cash equivalents, end of year
    
    $
    13,879
    
    
    $
    6,724
    
    
    $
    9,322
  44




---



##### 



IVANHOE ENERGY INC.
 
 Notes to the Consolidated Financial Statements
(all tabular amounts are expressed in thousands of U.S. Dollars, except share amounts)
 1. NATURE OF OPERATIONS
 RTP TM Process HTL Technology HTL EOR E&P GTL Technology GTL
 2. SIGNIFICANT ACCOUNTING POLICIES
 GAAP
   Going Concern and Basis of Presentation
  Principles of Consolidation
    45




---



##### 



Foreign Currency Translation
  Cash and Cash Equivalents
  Financial Instruments
  Oil and Gas Properties
 Full Cost Accounting
  Depletion
  Impairment of Proved Oil and Gas Properties
  46




---



##### 



Asset Retirement Costs
 CDF
   Development Costs
 MOU
    Furniture and Equipment
  Intangible Assets
  TM Syntroleum
 47




---



##### 



Oil and Gas Revenue
   Earnings or Loss Per Share
  Income Taxes
  Stock Based Compensation
    Derivative Activities
  48




---



##### 



Impact of New and Pending Canadian GAAP Accounting Standards
 CICA S.1535 S.3862 S.3863
 S.1506
   S.1530 S.3855 S.3865
 3. CONCENTRATION OF CREDIT RISKS
   49




---



##### 



Accounts Receivable as
    
    
    Oil and Gas Revenues for the Yearat December 31,
    
    
    Ended December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2004U.S. CustomersA
    
    $
    776
    
    
    $
    738
    
    
    $
    10,351
    
    
    $
    8,812
    
    
    $
    6,140B
    
    
    142
    
    
    
    110
    
    
    
    1,094
    
    
    
    1,166
    
    
    
    1,040C
    
    
    57
    
    
    
    80
    
    
    
    277
    
    
    
    351
    
    
    
    300D
    
    
    
    
    
    
    327
    
    
    
    236
    
    
    
    1,607
    
    
    
    1,202All others
    
    
    17
    
    
    
    88
    
    
    
    107
    
    
    
    2,133
    
    
    
    629992
    
    
    
    1,343
    
    
    
    12,065
    
    
    
    14,069
    
    
    
    9,311China CustomerA
    
    
    5,572
    
    
    
    3,519
    
    
    
    35,683
    
    
    
    15,731
    
    
    
    8,4846,564
    
    
    
    4,862
    
    
    
    47,748
    
    
    
    29,800
    
    
    
    17,795Receivables from partners
    
    
    592
    
    
    
    4,888
    
    
    
    
    
    
    
    
    
    
    
    Other receivables
    
    
    279
    
    
    
    244
    
    
    
    
    
    
    
    
    
    
    
    $
    7,435
    
    
    $
    9,994
    
    
    $
    47,748
    
    
    $
    29,800
    
    
    $
    17,795
  4. OIL AND GAS PROPERTIES AND INVESTMENTS
  As at December 31, 2006Oil and GasU.S.
    
    
    China
    
    
    HTL
    
    
    GTL
    
    
    TotalOil and Gas Properties:Proved
    
    $
    102,884
    
    
    $
    106,171
    
    
    $
    
    
    
    $
    
    
    
    $
    209,055Unproved
    
    
    5,765
    
    
    
    8,279
    
    
    
    
    
    
    
    
    
    
    
    14,044108,649
    
    
    
    114,450
    
    
    
    
    
    
    
    
    
    
    
    223,099Accumulated depletion
    
    
    (21,249
    )
    
    
    (39,372
    )
    
    
    
    
    
    
    
    
    
    
    (60,621
    )Accumulated provision for impairment
    
    
    (50,350
    )
    
    
    (10,420
    )
    
    
    
    
    
    
    
    
    
    
    (60,770
    )37,050
    
    
    
    64,658
    
    
    
    
    
    
    
    
    
    
    
    101,708HTL and GTL Investments:Feasibility studies and other deferred costs
    
    
    
    
    
    
    
    
    
    
    7,020
    
    
    
    5,054
    
    
    
    12,074Commercial demonstration facility
    
    
    
    
    
    
    
    
    
    
    11,700
    
    
    
    
    
    
    
    11,700Accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    (3,789
    )
    
    
    
    
    
    
    (3,789
    )
    
    
    
    
    
    
    
    14,931
    
    
    
    5,054
    
    
    
    19,985Furniture and equipment
    
    
    530
    
    
    
    115
    
    
    
    80
    
    
    
    
    
    
    
    725Accumulated depreciation
    
    
    (414
    )
    
    
    (56
    )
    
    
    (30
    )
    
    
    
    
    
    
    (500
    )116
    
    
    
    59
    
    
    
    50
    
    
    
    
    
    
    
    225$
    37,166
    
    
    $
    64,717
    
    
    $
    14,981
    
    
    $
    5,054
    
    
    $
    121,918
 50




---



##### 



As at December 31, 2005Oil and GasU.S.
    
    
    China
    
    
    HTL
    
    
    GTL
    
    
    TotalOil and Gas Properties:Proved
    
    $
    99,721
    
    
    $
    71,760
    
    
    $
    
    
    
    $
    
    
    
    $
    171,481Unproved
    
    
    9,676
    
    
    
    5,320
    
    
    
    
    
    
    
    
    
    
    
    14,996109,397
    
    
    
    77,080
    
    
    
    
    
    
    
    
    
    
    
    186,477Accumulated depletion
    
    
    (15,920
    )
    
    
    (16,036
    )
    
    
    
    
    
    
    
    
    
    
    (31,956
    )Accumulated provision for impairment
    
    
    (50,350
    )
    
    
    (5,000
    )
    
    
    
    
    
    
    
    
    
    
    (55,350
    )43,127
    
    
    
    56,044
    
    
    
    
    
    
    
    
    
    
    
    99,171HTL and GTL Investments:Feasibility studies and other deferred costs
    
    
    
    
    
    
    
    
    
    
    6,142
    
    
    
    4,570
    
    
    
    10,712Commercial demonstration facility
    
    
    
    
    
    
    
    
    
    
    9,599
    
    
    
    
    
    
    
    9,599
    
    
    
    
    
    
    
    15,741
    
    
    
    4,570
    
    
    
    20,311Furniture and equipment
    
    
    485
    
    
    
    95
    
    
    
    15
    
    
    
    
    
    
    
    595Accumulated depreciation
    
    
    (380
    )
    
    
    (37
    )
    
    
    (6
    )
    
    
    
    
    
    
    (423
    )105
    
    
    
    58
    
    
    
    9
    
    
    
    
    
    
    
    172$
    43,232
    
    
    $
    56,102
    
    
    $
    15,750
    
    
    $
    4,570
    
    
    $
    119,654
 Oil and Gas Properties
  Unocal
 CNPC Richfirst
 Mitsubishi
  51




---



##### 



As at December 31. 2006
    
    As at December 31. 2005
    
    As at December 31. 2004West Texas
    
    
    
    
    
    West Texas
    
    
    
    
    
    West TexasIntermediate
    
    Henry Hub
    
    Intermediate
    
    Henry Hub
    
    Intermediate
    
    Henry Hub(per Bbl)
    
    (per Mcf)
    
    (per Bbl)
    
    (per Mcf)
    
    (per Bbl)
    
    (per Mcf)2005
    
    NA
    
    NA
    
    NA
    
    NA
    
    $
    42.00
    
    
    $
    6.202006
    
    NA
    
    NA
    
    $
    57.00
    
    
    $
    10.50
    
    
    $
    40.00
    
    
    $
    6.002007
    
    $
    62.00
    
    
    $
    7.25
    
    
    $
    55.00
    
    
    $
    8.75
    
    
    $
    38.00
    
    
    $
    5.752008
    
    $
    60.00
    
    
    $
    7.50
    
    
    $
    51.00
    
    
    $
    7.50
    
    
    $
    36.00
    
    
    $
    5.502009
    
    $
    58.00
    
    
    $
    7.50
    
    
    $
    48.00
    
    
    $
    7.00
    
    
    $
    34.00
    
    
    $
    5.502010
    
    $
    57.00
    
    
    $
    7.50
    
    
    $
    46.50
    
    
    $
    6.75
    
    
    $
    33.00
    
    
    $
    5.502011
    
    $
    57.00
    
    
    $
    7.50
    
    
    $
    45.00
    
    
    $
    6.50
    
    
    $
    33.00
    
    
    $
    5.502012
    
    $
    57.50
    
    
    $
    7.75
    
    
    $
    45.00
    
    
    $
    6.50
    
    
    $
    33.00
    
    
    $
    5.502013
    
    $
    58.50
    
    
    $
    7.90
    
    
    $
    46.00
    
    
    $
    6.65
    
    
    $
    33.50
    
    
    $
    5.602014
    
    $
    59.75
    
    
    $
    8.05
    
    
    $
    46.75
    
    
    $
    6.75
    
    
    $
    34.00
    
    
    $
    5.652015
    
    $
    61.00
    
    
    $
    8.20
    
    
    $
    47.75
    
    
    $
    6.90
    
    
    $
    34.50
    
    
    $
    5.752016
    
    $
    62.25
    
    
    $
    8.40
    
    
    $
    48.75
    
    
    $
    7.05
    
    
    2% per year
    
    2% per year2017
    
    $
    63.50
    
    
    $
    8.55
    
    
    2% per year
    
    2% per year
    
    2% per year
    
    2% per yearThereafter
    
    2% per year
    
    2% per year
    
    2% per year
    
    2% per year
    
    2% per year
    
    2% per year
 Heavy- to-Light
   Gas-to-Liquids
  5. INTANGIBLE ASSETS  TECHNOLOGY
  52




---



##### 



HTL Technology
 TM TM
 Syntroleum GTL Master License
 Syntroleum
  6. NOTES PAYABLE
  December 31,
    
    
    December 31,2006
    
    
    2005Non-interest bearing promissory note, due 2006 through 2009
    
    $
    5,336
    
    
    $
    Variable rate bank note, 8.25%, due 2008
    
    
    1,500
    
    
    
    Variable rate bank note, 7.375%, due 2006 though 2007
    
    
    
    
    
    
    2,6398% promissory note, due 2007
    
    
    
    
    
    
    4,0006,836
    
    
    
    6,639Less:Unamortized discount
    
    
    (452
    )
    
    
    Current maturities
    
    
    (2,147
    )
    
    
    (1,667
    )(2,599
    )
    
    
    (1,667
    )$
    4,237
    
    
    $
    4,972
 Promissory Notes
    53




---



##### 



Bank Notes
 LIBOR
  Advance Payable
  Revolving Line of Credit
   2007
    
    $
    2,4602008
    
    
    3,9602009
    
    
    416$
    6,836
 7. ASSET RETIREMENT OBLIGATIONS
  2006
    
    
    2005Carrying balance, beginning of year
    
    $
    1,780
    
    
    $
    749Liabilities incurred
    
    
    139
    
    
    
    1,052Liabilities settled
    
    
    
    
    
    
    (2
    )Accretion expense
    
    
    86
    
    
    
    76Revisions in estimated cash flows
    
    
    (52
    )
    
    
    (95
    )1,953
    
    
    
    1,780Less: current portion
    
    
    
    
    
    
    (950
    )Carrying balance, end of year
    
    $
    1,953
    
    
    $
    830
 54




---



##### 



8. COMMITMENTS AND CONTINGENCIES
 Zitong Block Exploration Commitment
 Phase 1
 Mitsubishi
 Zitong Partners Phase 2
  Income Taxes
  Long Term Obligation
  Other Commitments
 Former Ensyn Affiliate
 55




---



##### 



Lease Commitments
   2007
    
    $
    9982008
    
    
    9702009
    
    
    7762010
    
    
    6512011
    
    
    476Thereafter
    
    
    119$
    3,990
 9. SHARE CAPITAL
  Private Placements
   Purchase Warrants
  56




---



##### 



CommonPurchase
    
    SharesWarrants
    
    Issuable(thousands)Balance December 31, 2003
    
    
    10,279
    
    
    
    5,765Purchase warrants issued for:Private placements
    
    
    7,173
    
    
    
    3,587Balance December 31, 2004
    
    
    17,452
    
    
    
    9,352Purchase warrants issued for:Private placements
    
    
    16,296
    
    
    
    16,296Refinance of convertible debt
    
    
    2,000
    
    
    
    2,000Purchase warrants exercised
    
    
    (9,029
    )
    
    
    (4,515
    )Purchase warrants expired
    
    
    (1,250
    )
    
    
    (1,250
    )Balance December 31, 2005
    
    
    25,469
    
    
    
    21,883Purchase warrants expired
    
    
    (7,173
    )
    
    
    (3,587
    )Private placements
    
    
    11,400
    
    
    
    11,400Balance December 31, 2006
    
    
    29,696
    
    
    
    29,696
   Purchase WarrantsPrice per
    
    
    
    
    
    
    
    
    
    
    Common
    
    
    
    
    
    
    
    
    
    
    ExerciseYear of
    
    Special
    
    
    
    
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    
    
    
    
    Price perIssue
    
    Warrant
    
    
    Issued
    
    
    Exercisable
    
    
    Issuable
    
    
    Value
    
    
    Expiry Date
    
    
    Share(thousands)
    
    
    ($U.S. 000)2005
    
    Cdn.  $3.10
    
    
    4,100
    
    
    
    4,100
    
    
    
    4,100
    
    
    $
    2,412
    
    
    April 2007
    
    Cdn. $3.502005
    
    Cdn.  $3.10
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    534
    
    
    July 2007
    
    Cdn. $3.502005
    
    
    U.S. $1.63
    
    
    
    11,196
    
    
    
    11,196
    
    
    
    11,196
    
    
    
    1,891
    
    
    November 2007
    
    
    U.S. $2.502005
    
    
    n/a
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    313
    
    
    November 2007
    
    
    U.S. $2.002006
    
    
    U.S.$2.23
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    18,805
    
    
    May 2011
    
    Cdn. $2.9329,696
    
    
    
    29,696
    
    
    
    29,696
    
    
    $
    23,955
  B-S
 10. STOCK BASED COMPENSATION
    57




---



##### 



2006
    
    2005
    
    2004Expected term (in years)
    
    
    5.3
    
    
    
    4.0
    
    
    
    4.0Volatility
    
    
    82.6
    %
    
    
    77.3
    %
    
    
    107.6
    %Dividend Yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Risk-free rate
    
    
    4.3
    %
    
    
    3.5
    %
    
    
    4.0
    %
     December 31, 2006
    
    December 31, 2005
    
    December 31, 2004Weighted-
    
    
    
    
    
    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
    
    
    10,278
    
    
    $
    2.21
    
    
    
    8,246
    
    
    $
    2.65
    
    
    
    8,949
    
    
    $
    2.64Granted
    
    
    3,419
    
    
    $
    3.02
    
    
    
    3,664
    
    
    $
    2.84
    
    
    
    608
    
    
    $
    2.52Exercised
    
    
    (297
    )
    
    $
    2.05
    
    
    
    (111
    )
    
    $
    1.52
    
    
    
    (975
    )
    
    $
    2.43Cancelled/forfeited
    
    
    (1,030
    )
    
    $
    3.40
    
    
    
    (1,521
    )
    
    $
    6.14
    
    
    
    (336
    )
    
    $
    2.96Outstanding at end of year
    
    
    12,370
    
    
    $
    2.34
    
    
    
    10,278
    
    
    $
    2.21
    
    
    
    8,246
    
    
    $
    2.65Options exercisable at end of year
    
    
    7,720
    
    
    $
    1.92
    
    
    
    6,547
    
    
    $
    1.74
    
    
    
    6,698
    
    
    $
    2.44
   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.$)$0.50
    
    
    3,817
    
    
    
    1.6
    
    
    $
    0.50
    
    
    
    3,817
    
    
    
    
    
    1.6
    
    
    
    
    $
    0.50$1.56 to $2.18
    
    
    630
    
    
    
    4.0
    
    
    $
    1.88
    
    
    
    299
    
    
    
    
    
    3.6
    
    
    
    
    $
    1.91$2.42 to $3.62
    
    
    7,293
    
    
    
    4.1
    
    
    $
    3.05
    
    
    
    3,100
    
    
    
    
    
    3.0
    
    
    
    
    $
    3.04$5.37 to $7.00
    
    
    630
    
    
    
    1.9
    
    
    $
    5.75
    
    
    
    504
    
    
    
    
    
    1.9
    
    
    
    
    $
    5.75$0.50 to $7.00
    
    
    12,370
    
    
    
    3.2
    
    
    $
    2.34
    
    
    
    7,720
    
    
    
    
    
    2.3
    
    
    
    
    $
    1.92
 58




---



##### 



11. RETIREMENT PLAN
 4 01(k) Plan
 12. SEGMENT INFORMATION
  Oil and Gas
  HTL
 TM
 GTL
  Corporate
 .
  59




---



##### 



Year Ended December 31, 2006Oil and GasU.S.
    
    
    China
    
    
    HTL
    
    
    GTL
    
    
    Corporate
    
    
    TotalOil and gas revenue
    
    $
    12,065
    
    
    $
    35,683
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    47,748Loss on derivative instruments
    
    
    (424
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (424
    )Interest income
    
    
    139
    
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    574
    
    
    
    77611,780
    
    
    
    35,746
    
    
    
    
    
    
    
    
    
    
    
    574
    
    
    
    48,100Operating costs
    
    
    4,299
    
    
    
    11,834
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,133General and administrative
    
    
    1,676
    
    
    
    1,337
    
    
    
    
    
    
    
    
    
    
    
    7,167
    
    
    
    10,180Business and technology development
    
    
    
    
    
    
    
    
    
    
    6,177
    
    
    
    1,433
    
    
    
    
    
    
    
    7,610Depletion and depreciation
    
    
    5,378
    
    
    
    23,345
    
    
    
    3,812
    
    
    
    10
    
    
    
    5
    
    
    
    32,550Interest expense and financing costs
    
    
    290
    
    
    
    156
    
    
    
    10
    
    
    
    
    
    
    
    507
    
    
    
    963Write off of deferred acquisition costs
    
    
    
    
    
    
    736
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    736Write-downs and provision for impairment
    
    
    
    
    
    5,420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,42011,643
    
    
    
    42,828
    
    
    
    9,999
    
    
    
    1,443
    
    
    
    7,679
    
    
    
    73,592Net Income (Loss)
    
    $
    137
    
    
    $
    (7,082
    )
    
    $
    (9,999
    )
    
    $
    (1,443
    )
    
    $
    (7,105
    )
    
    $
    (25,492
    )Capital Investments
    
    $
    5,550
    
    
    $
    9,086
    
    
    $
    2,722
    
    
    $
    484
    
    
    $
    
    
    
    $
    17,842Identifiable Assets (As at December 31, 2006)
    $
    42,158
    
    
    $
    72,970
    
    
    $
    107,186
    
    
    $
    15,081
    
    
    $
    11,149
    
    
    $
    248,544
 Year ended December 31, 2005Oil and GasU.S.
    
    
    China
    
    
    HTL
    
    
    GTL
    
    
    Corporate
    
    
    TotalOil and gas revenue
    
    $
    14,069
    
    
    $
    15,731
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    29,800Interest income
    
    
    30
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    13914,099
    
    
    
    15,738
    
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    29,939Operating costs
    
    
    5,001
    
    
    
    2,602
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,603General and administrative
    
    
    1,178
    
    
    
    2,076
    
    
    
    
    
    
    
    
    
    
    
    6,275
    
    
    
    9,529Business and product development
    
    
    
    
    
    
    
    
    
    
    3,671
    
    
    
    1,307
    
    
    
    
    
    
    
    4,978Depletion and depreciation
    
    
    5,039
    
    
    
    9,378
    
    
    
    13
    
    
    
    11
    
    
    
    6
    
    
    
    14,447Interest expense and financing costs
    
    
    311
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    943
    
    
    
    1,258Write-downs and provision for impairment
    
    
    
    
    
    5,000
    
    
    
    357
    
    
    
    279
    
    
    
    
    
    
    
    5,63611,529
    
    
    
    19,056
    
    
    
    4,045
    
    
    
    1,597
    
    
    
    7,224
    
    
    
    43,451Net Income (Loss)
    
    $
    2,570
    
    
    $
    (3,318
    )
    
    $
    (4,045
    )
    
    $
    (1,597
    )
    
    $
    (7,122
    )
    
    $
    (13,512
    )Capital Investments
    
    $
    6,514
    
    
    $
    30,730
    
    
    $
    4,982
    
    
    $
    1,056
    
    
    $
    
    
    
    $
    43,282Identifiable Assets (As at December 31, 2005)
    $
    48,070
    
    
    $
    65,020
    
    
    $
    107,869
    
    
    $
    14,609
    
    
    $
    5,309
    
    
    $
    240,877
 60




---



##### 



Year ended December 31, 2004Oil and GasU.S.
    
    
    China
    
    
    HTL
    
    
    GTL
    
    
    Corporate
    
    
    TotalOil and gas revenue
    
    $
    9,311
    
    
    $
    8,484
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    17,795Interest income
    
    
    10
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    176
    
    
    
    2029,321
    
    
    
    8,500
    
    
    
    
    
    
    
    
    
    
    
    176
    
    
    
    17,997Operating costs
    
    
    3,159
    
    
    
    1,914
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,073General and administrative
    
    
    990
    
    
    
    960
    
    
    
    
    
    
    
    
    
    
    
    5,325
    
    
    
    7,275Business and technology development
    
    
    
    
    
    
    
    
    
    
    442
    
    
    
    1,471
    
    
    
    
    
    
    
    1,913Depletion and depreciation
    
    
    4,594
    
    
    
    2,864
    
    
    
    4
    
    
    
    16
    
    
    
    4
    
    
    
    7,482Interest expense
    
    
    195
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184
    
    
    
    379Write-downs and provision for impairment
    
    16,350
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    16,60025,288
    
    
    
    5,738
    
    
    
    446
    
    
    
    1,737
    
    
    
    5,513
    
    
    
    38,722Net Income (Loss)
    
    $
    (15,967
    )
    
    $
    2,762
    
    
    $
    (446
    )
    
    $
    (1,737
    )
    
    $
    (5,337
    )
    
    $
    (20,725
    )Capital Investments
    
    $
    17,428
    
    
    $
    26,965
    
    
    $
    1,966
    
    
    $
    95
    
    
    $
    
    
    
    $
    46,454Identifiable Assets (As at December 31, 2004)
    $
    48,465
    
    
    $
    44,960
    
    
    $
    2,441
    
    
    $
    13,867
    
    
    $
    8,753
    
    
    $
    118,486
 13. DERIVATIVE INSTRUMENTS
    14. INCOME TAXES
 :
 Year ended December 31,2006
    
    
    2005
    
    
    2004Tax benefit computed at the combined Canadian federal and
provincial statutory income tax rates
    
    $
    (8,188
    )
    
    $
    (4,543
    )
    
    $
    (6,968
    )Effect of change in effective income tax rates on future tax assets
    
    
    870
    
    
    
    
    
    
    
    (488
    )Foreign net losses affected at lower income tax rates
    
    
    113
    
    
    
    1,457
    
    
    
    (246
    )Expiry of tax loss carry-forwards
    
    
    1,583
    
    
    
    1,734
    
    
    
    977Effect of change in foreign exchange rates
    
    
    (14
    )
    
    
    (659
    )
    
    
    (3,433
    )Stock-based compensation not deductible for income tax purposes
    
    
    1,031
    
    
    
    756
    
    
    
    375Tax credit carry-forward
    
    
    (428
    )
    
    
    (362
    )
    
    
    (1,094
    )Change in prior year estimate of tax loss carry-forwards
    
    
    503
    
    
    
    (368
    )
    
    
    1,756Other permanent differences
    
    
    161
    
    
    
    
    
    
    
    1,250Other
    
    
    (66
    )
    
    
    16
    
    
    
    (5
    )(4,435
    )
    
    
    (1,969
    )
    
    
    (7,876
    )Valuation allowance
    
    
    4,435
    
    
    
    1,969
    
    
    
    7,876$
    
    
    
    $
    
    
    
    $
    
 61




---



##### 



As at December 31,2006
    
    
    2005Future Income Tax
    
    
    Future Income TaxAssets
    
    
    Liabilities
    
    
    Assets
    
    
    LiabilitiesOil and gas properties and investments
    
    $
    
    
    
    $
    (22,694
    )
    
    $
    
    
    
    $
    (19,673
    )Intangibles
    
    
    
    
    
    
    (36,778
    )
    
    
    
    
    
    
    (36,746
    )Tax loss carry-forwards
    
    
    78,834
    
    
    
    
    
    
    
    71,774
    
    
    
    Tax credit carry-forward
    
    
    1,884
    
    
    
    
    
    
    
    1,456
    
    
    
    Valuation allowance
    
    
    (21,246
    )
    
    
    
    
    
    
    (16,811
    )
    
    
    $
    59,472
    
    
    $
    (59,472
    )
    
    $
    56,419
    
    
    $
    (56,419
    )
   15. NET LOSS PER SHARE
  Year ended December 31,(thousands of shares)2006
    
    2005
    
    2004Richfirst conversion rights
    
    
    1,104
    
    
    
    9,631
    
    
    
    9,537Stock options
    
    
    3,292
    
    
    
    3,211
    
    
    
    3,796Purchase warrants
    
    
    121
    
    
    
    862
    
    
    
    2,1074,517
    
    
    
    13,704
    
    
    
    15,440
   Year ended December 31,(thousands of shares)2006
    
    2005
    
    2004Stock options
    
    
    7,022
    
    
    
    5,103
    
    
    
    3,669Purchase warrants
    
    
    25,184
    
    
    
    9,689
    
    
    
    4,082Convertible debt
    
    
    
    
    
    
    1,161
    
    
    
    32,206
    
    
    
    15,953
    
    
    
    7,751
 62




---



##### 



16. SUPPLEMENTAL CASH FLOW INFORMATION
  Year Ended December 31,2006
    
    
    2005
    
    
    2004Cash paid during the period for:Income taxes
    
    $
    5
    
    
    $
    20
    
    
    $
    3Interest
    
    $
    430
    
    
    $
    1,138
    
    
    $
    317Investing and Financing activities, non-cash:Acquisition of oil and gas assets(see Note 18)Shares issued
    
    $
    20,000
    
    
    $
    
    
    
    $
    Debt issued
    
    
    6,547
    
    
    
    
    
    
    
    Receivable applied to acquisition
    
    
    1,746
    
    
    
    
    
    
    
    $
    28,293
    
    
    $
    
    
    
    $
    Shares issued for Merger(see Note 18)
    
    $
    
    
    
    $
    75,000
    
    
    $
    Refinance of convertible debt(see Note 6)
    
    $
    
    
    
    $
    4,000
    
    
    $
    Changes in non-cash working capital itemsOperating Activities:Accounts receivable
    
    $
    (1,375
    )
    
    $
    (1,635
    )
    
    $
    (1,949
    )Prepaid and other current assets
    
    
    (434
    )
    
    
    16
    
    
    
    (403
    )Accounts payable and accrued liabilities
    
    
    (1,067
    )
    
    
    1,840
    
    
    
    1,704(2,876
    )
    
    
    221
    
    
    
    (648
    )Investing ActivitiesAccounts receivable
    
    
    2,188
    
    
    
    (2,982
    )
    
    
    (708
    )Prepaid and other current assets
    
    
    (1
    )
    
    
    457
    
    
    
    Accounts payable and accrued liabilities
    
    
    (14,895
    )
    
    
    14,547
    
    
    
    3,972(12,708
    )
    
    
    12,022
    
    
    
    3,264$
    (15,584
    )
    
    $
    12,243
    
    
    $
    2,616
 17. RELATED PARTY TRANSACTIONS
  18.
MERGER AND ACQUISITIONS
 Ensyn Merger Merger Agreement Merger Shares HTL Plant
 63




---



##### 



CDF Joint
Venture TM
 Sunwing
 CMA
 19. ADDITIONAL DISCLOSURES REQUIRED UNDER U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  Consolidated Balance Sheets
  64




---



##### 



Shareholders Equity and Oil and Gas Properties and Investments
 As at December 31, 2006Oil and Gas
    
    
    
    
    
    
    Shareholders EquityProperties and
    
    
    Derivative
    
    
    Share Capital
    
    
    Contributed
    
    
    AccumulatedInvestments
    
    
    Instruments
    
    
    and Warrants
    
    
    Surplus
    
    
    Deficit
    
    
    TotalCanadian GAAP
    
    $
    121,918
    
    
    $
    493
    
    
    $
    342,680
    
    
    $
    6,489
    
    
    $
    (120,783
    )
    
    $
    228,386Adjustments for:Reduction in stated capital (i)
    
    
    
    
    
    
    
    
    
    
    74,455
    
    
    
    
    
    
    
    (74,455
    )
    
    
    Accounting for stock based
compensation (ii)
    
    
    
    
    
    
    
    
    
    
    (387
    )
    
    
    (3,361
    )
    
    
    3,748
    
    
    
    Ascribed value of shares issued for U.S.
royalty interests, net (iv)
    
    
    1,358
    
    
    
    
    
    
    
    1,358
    
    
    
    
    
    
    
    
    
    
    
    1,358Fair value adjustment of derivative
instruments (iii)
    
    
    
    
    
    
    6,378
    
    
    
    (8,552
    )
    
    
    
    
    
    
    2,174
    
    
    
    (6,378
    )Provision for impairment (v)
    
    
    (26,270
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,270
    )
    
    
    (26,270
    )Depletion adjustments due to differences
in provision for impairment (vi)
    
    
    4,402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,402
    
    
    
    4,402HTL and GTL development costs
expensed (vii)
    
    
    (11,669
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,669
    )
    
    
    (11,669
    )U.S. GAAP
    
    $
    89,739
    
    
    $
    6,871
    
    
    $
    409,554
    
    
    $
    3,128
    
    
    $
    (222,853
    )
    
    $
    189,829
 As at December 31, 2005DerivativeOil and Gas
    
    
    Instruments -
    
    
    Shareholders Equity (as restated - see Note 19 iii)Properties and
    
    
    as restated (See
    
    
    Share Capital
    
    
    Contributed
    
    
    AccumulatedInvestments
    
    
    Note 19 iii)
    
    
    and Warrants
    
    
    Surplus
    
    
    Deficit
    
    
    TotalCanadian GAAP
    
    $
    119,654
    
    
    $
    
    
    
    $
    296,238
    
    
    $
    3,820
    
    
    $
    (95,291
    )
    
    $
    204,767Adjustments for:Reduction in stated capital (i)
    
    
    
    
    
    
    
    
    
    
    74,455
    
    
    
    
    
    
    
    (74,455
    )
    
    
    Accounting for stock based
compensation (ii)
    
    
    
    
    
    
    
    
    
    
    (316
    )
    
    
    (3,432
    )
    
    
    3,748
    
    
    
    Ascribed value of shares issued for U.S.
royalty interests, net (iv)
    
    
    1,358
    
    
    
    
    
    
    
    1,358
    
    
    
    
    
    
    
    
    
    
    
    1,358Fair value adjustment of derivative
instruments (iii)
    
    
    
    
    
    
    80
    
    
    
    (2,946
    )
    
    
    
    
    
    
    2,866
    
    
    
    (80
    )Provision for impairment (v)
    
    
    (8,150
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,150
    )
    
    
    (8,150
    )Depletion adjustments due to differences
in provision for impairment (vi)
    
    
    1,562
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,562
    
    
    
    1,562HTL and GTL development costs
expensed (vii)
    
    
    (10,712
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,712
    )
    
    
    (10,712
    )U.S. GAAP
    
    $
    103,712
    
    
    $
    80
    
    
    $
    368,789
    
    
    $
    388
    
    
    $
    (180,432
    )
    
    $
    188,745
 Shareholders Equity
  65




---



##### 



FASB SFAS No. 123(R)
 SFAS No. 133
  As previouslyreported
    
    Adjustments
    
    As RestatedDerivative liability
    
    
    
    
    
    
    80
    
    
    
    80Share Capital and Warrants
    
    
    371,735
    
    
    
    (2,946
    )
    
    
    368,789Accumulated deficit
    
    
    (183,298
    )
    
    
    2,866
    
    
    
    (180,432
    )Shareholders equity
    
    
    188,825
    
    
    
    (80
    )
    
    
    188,745Net loss
    
    
    (14,972
    )
    
    
    2,866
    
    
    
    (12,106
    )Net loss per share  basic and diluted
    
    
    (0.07
    )
    
    
    0.01
    
    
    
    (0.06
    )
 Oil and Gas Properties and Investments
   66




---



##### 



Ceiling Test Impairments
    
    
    (Increase)U.S. GAAP
    
    
    Canadian GAAP
    
    
    DecreaseU.S. PropertiesPrior to 2004
    
    $
    34,000
    
    
    $
    34,000
    
    
    $
    2004
    
    
    15,000
    
    
    
    16,350
    
    
    
    1,3502005
    
    
    2,800
    
    
    
    
    
    
    
    (2,800
    )2006
    
    
    7,600
    
    
    
    
    
    
    
    (7,600
    )59,400
    
    
    
    50,350
    
    
    
    (9,050
    )China PropertiesPrior to 2004
    
    
    10,000
    
    
    
    
    
    
    
    (10,000
    )2004
    
    
    
    
    
    
    
    
    
    
    2005
    
    
    1,700
    
    
    
    5,000
    
    
    
    3,3002006
    
    
    15,940
    
    
    
    5,420
    
    
    
    (10,520
    )27,640
    
    
    
    10,420
    
    
    
    (17,220
    )$
    87,040
    
    
    $
    60,770
    
    
    $
    (26,270
    )
   Consolidated Statements of Operations
  Year ended December 31,2006
    
    
    2005
    
    
    2004Net Loss PerNet Loss - as
    
    
    Share - asNet
    
    
    Net Loss
    
    
    restated (See
    
    
    restated (See
    
    
    Net
    
    
    Net LossLoss
    
    
    Per Share
    
    
    Note 20 iii)
    
    
    Note 20 iii)
    
    
    Loss
    
    
    Per ShareCanadian GAAP
    
    $
    (25,492
    )
    
    $
    (0.11
    )
    
    $
    (13,512
    )
    
    $
    (0.07
    )
    
    $
    (20,725
    )
    
    $
    (0.12
    )Stock based compensation expense (viii)
    
    
    
    
    
    
    
    
    
    1,788
    
    
    
    0.01
    
    
    
    1,173
    
    
    
    0.01Provision for impairment (v and ix)
    
    
    (18,120
    )
    
    
    (0.08
    )
    
    
    500
    
    
    
    
    
    
    
    1,350
    
    
    
    0.01Depletion adjustments due to differences in
provision for impairment (ix)
    
    
    2,840
    
    
    
    0.01
    
    
    
    1,080
    
    
    
    0.01
    
    
    
    316
    
    
    
    HTL and GTL development costs
expensed, net (x)
    
    
    (958
    )
    
    
    
    
    
    
    (4,828
    )
    
    
    (0.02
    )
    
    
    (1,810
    )
    
    
    (0.02
    )Fair value adjustment of derivative
instruments (iii)
    
    
    (692
    )
    
    
    
    
    
    
    2,866
    
    
    
    0.01
    
    
    
    
    
    
    
    U.S. GAAP
    
    $
    (42,422
    )
    
    $
    (0.18
    )
    
    $
    (12,106
    )
    
    $
    (0.06
    )
    
    $
    (19,696
    )
    
    $
    (0.12
    )Weighted Average Number of Shares under U.S.
GAAP (in thousands)
    
    
    
    
    
    
    235,640
    
    
    
    
    
    
    
    195,803
    
    
    
    
    
    
    
    167,612
 67




---



##### 



Stock Based Compensation
  68




---



##### 



Year ended December 31,2005
    
    
    2004Net loss under U.S. GAAP
    
    $
    (12,106
    )
    
    $
    (19,696
    )Stock-based compensation expense determined under the fair
value based method for employee and director awards
    
    
    (1,911
    )
    
    
    (1,869
    )Pro forma net loss under U.S. GAAP
    
    $
    (14,017
    )
    
    $
    (21,565
    )Basic loss per common share under U.S. GAAP:As reported
    
    $
    (0.06
    )
    
    $
    (0.12
    )Pro forma
    
    $
    (0.07
    )
    
    $
    (0.13
    )Weighted Average Number of Shares under U.S. GAAP (in thousands)
    
    
    195,803
    
    
    
    167,612Stock options granted during the period (thousands)
    
    
    2,889
    
    
    
    458Weighted average exercise price
    
    $
    2.41
    
    
    $
    1.88Weighted average fair value of options granted during the year
    
    $
    1.52
    
    
    $
    1.40
   Weighted-Number
    
    Averageof Stock
    
    Grant DateOptions
    
    Fair Value(thousands)
    
    (Cdn.$)Outstanding at December 31, 2005
    
    
    3,731
    
    
    $
    1.47Granted
    
    
    3,419
    
    
    $
    1.46Vested
    
    
    (2,084
    )
    
    $
    1.48Cancelled/forfeited
    
    
    (416
    )
    
    $
    1.39Outstanding at December 31, 2006
    
    
    4,650
    
    
    $
    1.46
  Pro Forma Effect of Merger and Acquisition
  Year Ended December 31,(unaudited)2005
    
    
    2004Net
    
    
    Net Loss
    
    
    
    
    
    
    Net
    
    
    Net LossRevenue
    
    
    Loss
    
    
    Per Share
    
    
    Revenue
    
    
    Loss
    
    
    Per ShareAs reported
    
    $
    29,939
    
    
    $
    (12,106
    )
    
    $
    (0.06
    )
    
    $
    17,997
    
    
    $
    (19,696
    )
    
    $
    (0.12
    )Pro forma adjustments
    
    
    736
    
    
    
    (730
    )
    
    
    
    
    
    
    371
    
    
    
    (2,248
    )
    
    
    $
    30,675
    
    
    $
    (12,836
    )
    
    $
    (0.06
    )
    
    $
    18,368
    
    
    $
    (21,944
    )
    
    $
    (0.12
    )Pro Forma Weighted
Average Number of
Shares (in
thousands)
    
    
    
    
    
    
    
    
    
    
    204,186
    
    
    
    
    
    
    
    
    
    
    
    197,612
  69




---



##### 



Year ended December 31,(unaudited)2006
    
    
    2005Net Income
    
    
    Net Income
    
    
    
    
    
    
    Net Income
    
    
    Net IncomeRevenue
    
    
    (Loss)
    
    
    (Loss) Per Share
    
    
    Revenue
    
    
    (Loss)
    
    
    (Loss) Per ShareAs reported
    
    $
    48,100
    
    
    $
    (42,422
    )
    
    $
    (0.18
    )
    
    $
    29,939
    
    
    $
    (12,106
    )
    
    $
    (0.06
    )Pro forma adjustments
    
    
    1,051
    
    
    
    809
    
    
    
    
    
    
    
    9,336
    
    
    
    3,419
    
    
    
    0.02$
    49,151
    
    
    $
    (41,613
    )
    
    $
    (0.18
    )
    
    $
    39,275
    
    
    $
    (8,687
    )
    
    $
    (0.04
    )Pro Forma Weighted
Average Number of
Shares (in
thousands)
    
    
    
    
    
    
    
    
    
    
    236,840
    
    
    
    
    
    
    
    
    
    
    
    204,394
 Consolidated Statements of Cash Flow
  Additional U.S. GAAP Disclosures
 Oil and Gas Properties and Investments
  As at December 31, 2006
    
    
    As at December 31, 2005U.S.
    
    
    China
    
    
    Total
    
    
    U.S.
    
    
    China
    
    
    TotalProperty acquisition costs
    
    $
    21,494
    
    
    $
    31,137
    
    
    $
    52,631
    
    
    $
    20,613
    
    
    $
    2,418
    
    
    $
    23,031Royalty rights acquired
    
    
    10,582
    
    
    
    
    
    
    
    10,582
    
    
    
    10,582
    
    
    
    
    
    
    
    10,582Exploration costs
    
    
    42,519
    
    
    
    18,010
    
    
    
    60,529
    
    
    
    41,289
    
    
    
    15,525
    
    
    
    56,814Development costs
    
    
    35,412
    
    
    
    65,014
    
    
    
    100,426
    
    
    
    38,272
    
    
    
    58,861
    
    
    
    97,133Commercial demonstration facility
    
    
    12,104
    
    
    
    
    
    
    
    12,104
    
    
    
    9,600
    
    
    
    
    
    
    
    9,600Support equipment and general property
    
    
    685
    
    
    
    329
    
    
    
    1,014
    
    
    
    556
    
    
    
    315
    
    
    
    871122,796
    
    
    
    114,490
    
    
    
    237,286
    
    
    
    120,912
    
    
    
    77,119
    
    
    
    198,031Accumulated depletion and depreciation
    
    
    (24,717
    )
    
    
    (35,790
    )
    
    
    (60,507
    )
    
    
    (16,015
    )
    
    
    (14,804
    )
    
    
    (30,819
    )Provision for impairment
    
    
    (59,400
    )
    
    
    (27,640
    )
    
    
    (87,040
    )
    
    
    (51,800
    )
    
    
    (11,700
    )
    
    
    (63,500
    )$
    38,679
    
    
    $
    51,060
    
    
    $
    89,739
    
    
    $
    53,097
    
    
    $
    50,615
    
    
    $
    103,712
   Incurred inPrior toTotal
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2004Property Acquisition
    
    $
    2,568
    
    
    $
    248
    
    
    $
    (145
    )
    
    $
    448
    
    
    $
    2,017Royalty rights
    
    
    659
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    659Exploration
    
    
    10,849
    
    
    
    2,427
    
    
    
    3,715
    
    
    
    3,008
    
    
    
    1,699$
    14,076
    
    
    $
    2,675
    
    
    $
    3,570
    
    
    $
    3,456
    
    
    $
    4,375
 70




---



##### 



Incurred inPrior toTotal
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2004U.S.North Yowlumne
    
    
    1,149
    
    
    
    135
    
    
    
    (35
    )
    
    
    288
    
    
    
    761Knights Landing
    
    
    2,158
    
    
    
    310
    
    
    
    1,848
    
    
    
    
    
    
    
    East Texas
    
    
    176
    
    
    
    26
    
    
    
    (9
    )
    
    
    8
    
    
    
    151San Joaquin Basin prospects  other
    
    
    2,314
    
    
    
    104
    
    
    
    59
    
    
    
    193
    
    
    
    1,9585,797
    
    
    
    575
    
    
    
    1,863
    
    
    
    489
    
    
    
    2,870ChinaZitong Block
    
    
    8,279
    
    
    
    2,100
    
    
    
    1,707
    
    
    
    2,967
    
    
    
    1,505$
    14,076
    
    
    $
    2,675
    
    
    $
    3,570
    
    
    $
    3,456
    
    
    $
    4,375
  Accounts Payable and Accrued Liabilities
  As at December 31,2006
    
    
    2005Accounts payable and accruals
    
    $
    9,231
    
    
    $
    23,955Accrued salaries and related expenses
    
    
    76
    
    
    
    1,397Accrued interest
    
    
    11
    
    
    
    22Other accruals
    
    
    110
    
    
    
    417$
    9,428
    
    
    $
    25,791
 Impact of New and Pending U.S. GAAP Accounting Standards
 FASB SFAS No. 159
  SAB 108
 SFAS No. 157
 71




---



##### 



FIN 48
 SFAS No. 155
 SFAS No. 154
  72




---



##### 



QUARTERLY FINANCIAL DATA IN ACCORDANCE WITH CANADIAN AND U.S. GAAP (UNAUDITED)
 QUARTER ENDED2006
    
    
    20054th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr
    
    
    4th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr(restated)
    
    
    (restated)
    
    
    (restated)
    
    
    (restated)
    
    
    (restated)
    
    
    (restated)Total revenue
    
    $
    11,137
    
    
    $
    14,015
    
    
    $
    13,084
    
    
    $
    9,864
    
    
    $
    8,651
    
    
    $
    8,907
    
    
    $
    6,645
    
    
    $
    5,736Net loss:Canadian GAAP
    
    $
    (11,323
    )
    
    $
    (4,388
    )
    
    $
    (4,405
    )
    
    $
    (5,376
    )
    
    $
    (8,885
    )
    
    $
    (2,113
    )
    
    $
    (1,031
    )
    
    $
    (1,483
    )U.S. GAAP  as
originally reported
    
    $
    (18,255
    )
    
    $
    (7,117
    )
    
    $
    (3,982
    )
    
    $
    (12,112
    )
    
    $
    (8,557
    )
    
    $
    (1,843
    )
    
    $
    (1,564
    )
    
    $
    (3,008
    )Prior period adjustment
    
    
    
    
    
    
    1,695
    
    
    
    1,653
    
    
    
    (4,304
    )
    
    
    1,012
    
    
    
    2,373
    
    
    
    (519
    )
    
    
    U.S. GAAP  as restated
    
    $
    (18,255
    )
    
    $
    (5,422
    )
    
    $
    (2,329
    )
    
    $
    (16,416
    )
    
    $
    (7,545
    )
    
    $
    530
    
    
    $
    (2,083
    )
    
    $
    (3,008
    )Net loss per share:Canadian GAAP
    
    $
    (0.05
    )
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )U.S. GAAP  as
originally reported
    
    $
    (0.07
    )
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    (0.05
    )
    
    $
    (0.03
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.02
    )Prior period adjustment
    
    
    
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    (0.02
    )
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    U.S. GAAP  as restated
    
    $
    (0.07
    )
    
    $
    (0.03
    )
    
    $
    (0.01
    )
    
    $
    (0.07
    )
    
    $
    (0.03
    )
    
    $
    0.00
    
    
    $
    (0.01
    )
    
    $
    (0.02
    )
   
 SUPPLEMENTARY DISCLOSURES ABOUT OIL AND GAS PRODUCTION ACTIVITIES (UNAUDITED)
  Oil and Gas Reserves
    73




---



##### 



Oil (MBbl)
    
    Gas (MMcf)U.S.
    
    China
    
    Total
    
    U.S.Net proved reserves, December 31, 2003
    
    
    1,563
    
    
    
    15,699
    
    
    
    17,262
    
    
    
    695Revisions of previous estimates
    
    
    (121
    )
    
    
    (1,360
    )
    
    
    (1,481
    )
    
    
    87Extensions and discoveries
    
    
    240
    
    
    
    
    
    
    
    240
    
    
    
    1,289Purchases of reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    819Production
    
    
    (234
    )
    
    
    (235
    )
    
    
    (469
    )
    
    
    (207
    )Sale of reserves in place
    
    
    (18
    )
    
    
    (6,196
    )
    
    
    (6,214
    )
    
    
    Net proved reserves, December 31, 2004
    
    
    1,430
    
    
    
    7,908
    
    
    
    9,338
    
    
    
    2,683Revisions of previous estimates
    
    
    60
    
    
    
    (6,293
    )
    
    
    (6,233
    )
    
    
    (601
    )Extensions and discoveries
    
    
    19
    
    
    
    
    
    
    
    19
    
    
    
    98Production
    
    
    (237
    )
    
    
    (315
    )
    
    
    (552
    )
    
    
    (495
    )Net proved reserves, December 31, 2005
    
    
    1,272
    
    
    
    1,300
    
    
    
    2,572
    
    
    
    1,685Revisions of previous estimates
    
    
    54
    
    
    
    179
    
    
    
    233
    
    
    
    (214
    )Extensions and discoveries
    
    
    189
    
    
    
    
    
    
    
    189
    
    
    
    Purchases of reserves in place
    
    
    
    
    
    
    881
    
    
    
    881
    
    
    
    Production
    
    
    (208
    )
    
    
    (575
    )
    
    
    (783
    )
    
    
    (66
    )Sale of reserves in place
    
    
    (87
    )
    
    
    
    
    
    
    (87
    )
    
    
    (988
    )Net proved reserves, December 31, 2006
    
    
    1,220
    
    
    
    1,785
    
    
    
    3,005
    
    
    
    417Net proved developed reserves as at:December 31, 2004
    
    
    1,187
    
    
    
    1,142
    
    
    
    2,329
    
    
    
    2,365December 31, 2005
    
    
    1,099
    
    
    
    1,071
    
    
    
    2,170
    
    
    
    1,405December 31, 2006
    
    
    1,003
    
    
    
    1,330
    
    
    
    2,333
    
    
    
    417
 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 will also include production from probable and potential reserves;
    
    future, rather than year end, prices and costs will apply; and
    
    existing economic, operating and regulatory conditions are subject to change.
  74




---



##### 



2006U.S.
    
    
    China
    
    
    TotalFuture cash inflows
    
    $
    65,101
    
    
    $
    103,526
    
    
    $
    168,627Future development and restoration costs
    
    
    2,990
    
    
    
    11,660
    
    
    
    14,650Future production costs
    
    
    31,691
    
    
    
    38,369
    
    
    
    70,060Future net cash flows
    
    
    30,420
    
    
    
    53,497
    
    
    
    83,91710% annual discount
    
    
    7,332
    
    
    
    10,705
    
    
    
    18,037Standardized measure
    
    $
    23,088
    
    
    $
    42,792
    
    
    $
    65,880
 2005U.S.
    
    
    China
    
    
    TotalFuture cash inflows
    
    $
    83,418
    
    
    $
    76,533
    
    
    $
    159,951Future development and restoration costs
    
    
    2,890
    
    
    
    8,136
    
    
    
    11,026Future production costs
    
    
    32,699
    
    
    
    12,828
    
    
    
    45,527Future income taxes
    
    
    
    
    
    
    1,584
    
    
    
    1,584Future net cash flows
    
    
    47,829
    
    
    
    53,985
    
    
    
    101,81410% annual discount
    
    
    15,655
    
    
    
    10,686
    
    
    
    26,341Standardized measure
    
    $
    32,174
    
    
    $
    43,299
    
    
    $
    75,473
 2004U.S.
    
    
    China
    
    
    TotalFuture cash inflows
    
    $
    64,357
    
    
    $
    327,481
    
    
    $
    391,838Future development and restoration costs
    
    
    3,063
    
    
    
    84,682
    
    
    
    87,745Future production costs
    
    
    27,867
    
    
    
    58,488
    
    
    
    86,355Future income taxes
    
    
    
    
    
    
    44,708
    
    
    
    44,708Future net cash flows
    
    
    33,427
    
    
    
    139,603
    
    
    
    173,03010% annual discount
    
    
    11,238
    
    
    
    50,774
    
    
    
    62,012Standardized measure
    
    $
    22,189
    
    
    $
    88,829
    
    
    $
    111,018
  2006U.S.
    
    
    China
    
    
    TotalSale of oil and gas, net of production costs
    
    $
    (7,766
    )
    
    $
    (23,849
    )
    
    $
    (31,615
    )Net changes in prices and production costs
    
    
    (4,851
    )
    
    
    (12,907
    )
    
    
    (17,758
    )Extensions and discoveries, net of future
production and development costs
    
    
    1,355
    
    
    
    
    
    
    
    1,355Net change in future development costs
    
    
    (682
    )
    
    
    (7,800
    )
    
    
    (8,482
    )Development costs incurred during the period
that reduced future development costs
    
    
    2,572
    
    
    
    4,686
    
    
    
    7,258Revisions of previous quantity estimates
    
    
    319
    
    
    
    5,187
    
    
    
    5,506Accretion of discount
    
    
    3,217
    
    
    
    4,664
    
    
    
    7,881Net change in income taxes
    
    
    
    
    
    
    815
    
    
    
    815Purchases of reserves in place
    
    
    
    
    
    
    25,645
    
    
    
    25,645Sale of reserves in place
    
    
    (4,405
    )
    
    
    
    
    
    
    (4,405
    )Changes in production rates (timing) and other
    
    
    1,155
    
    
    
    3,052
    
    
    
    4,207Decrease
    
    
    (9,086
    )
    
    
    (507
    )
    
    
    (9,593
    )Standardized measure, beginning of year
    
    
    32,174
    
    
    
    43,299
    
    
    
    75,473Standardized measure, end of year
    
    $
    23,088
    
    
    $
    42,792
    
    
    $
    65,880
 75




---



##### 



2005U.S.
    
    
    China
    
    
    TotalSale of oil and gas, net of production costs
    
    $
    (9,068
    )
    
    $
    (13,129
    )
    
    $
    (22,197
    )Net changes in prices and production costs
    
    
    15,110
    
    
    
    20,016
    
    
    
    35,126Extensions and discoveries
    
    
    1,051
    
    
    
    
    
    
    
    1,051Net change in future development costs
    
    
    (694
    )
    
    
    46,380
    
    
    
    45,686Revisions of previous quantity estimates
    
    
    (1,492
    )
    
    
    (150,588
    )
    
    
    (152,080
    )Accretion of discount
    
    
    5,078
    
    
    
    26,798
    
    
    
    31,876Net change in income taxes
    
    
    
    
    
    
    24,993
    
    
    
    24,993Increase (decrease)
    
    
    9,985
    
    
    
    (45,530
    )
    
    
    (35,545
    )Standardized measure, beginning of year
    
    
    22,189
    
    
    
    88,829
    
    
    
    111,018Standardized measure, end of year
    
    $
    32,174
    
    
    $
    43,299
    
    
    $
    75,473
 2004U.S.
    
    
    China
    
    
    TotalSale of oil and gas, net of production costs
    
    $
    (6,152
    )
    
    $
    (6,570
    )
    
    $
    (12,722
    )Net changes in prices and production costs
    
    
    1,015
    
    
    
    56,329
    
    
    
    57,344Extensions and discoveries
    
    
    6,779
    
    
    
    
    
    
    
    6,779Net change in future development costs
    
    
    (1,700
    )
    
    
    (14,424
    )
    
    
    (16,124
    )Revisions of previous quantity estimates
    
    
    (1,401
    )
    
    
    (22,847
    )
    
    
    (24,248
    )Accretion of discount
    
    
    3,596
    
    
    
    25,330
    
    
    
    28,926Net change in income taxes
    
    
    
    
    
    
    (9,107
    )
    
    
    (9,107
    )Purchases of reserves in place
    
    
    3,050
    
    
    
    
    
    
    
    3,050Sale of reserves
    
    
    (108
    )
    
    
    (21,646
    )
    
    
    (21,754
    )Increase
    
    
    5,079
    
    
    
    7,065
    
    
    
    12,144Standardized measure, beginning of year
    
    
    17,110
    
    
    
    81,764
    
    
    
    98,874Standardized measure, end of year
    
    $
    22,189
    
    
    $
    88,829
    
    
    $
    111,018
  For the year ended December 31,2006
    
    
    2005
    
    
    2004U.S.Property acquisitionProved
    
    $
    
    
    
    $
    
    
    
    $
    3,204Unproved
    
    
    881
    
    
    
    (1,682
    )
    
    
    1,572Exploration
    
    
    1,230
    
    
    
    6,169
    
    
    
    4,351Development
    
    
    3,465
    
    
    
    2,912
    
    
    
    8,3895,576
    
    
    
    7,399
    
    
    
    17,516ChinaProperty acquisitionProved
    
    
    28,719
    
    
    
    
    
    
    
    Exploration
    
    
    2,485
    
    
    
    6,931
    
    
    
    6,925Development
    
    
    6,153
    
    
    
    23,756
    
    
    
    19,97537,357
    
    
    
    30,687
    
    
    
    26,900Total
    
    $
    42,933
    
    
    $
    38,086
    
    
    $
    44,416
    U.S.Year ended December 31, 2006
    
    $
    22.11Year ended December 31, 2005
    
    $
    14.91Year ended December 31, 2004
    
    $
    16.52
 76




---



##### 



ChinaYear ended December 31, 2006
    
    $
    36.46Year ended December 31, 2005
    
    $
    27.00Year ended December 31, 2004
    
    $
    11.19
  2006
    
    
    2005
    
    
    2004U.S.
    
    
    China
    
    
    Total
    
    
    U.S.
    
    
    China
    
    
    Total
    
    
    U.S.
    
    
    China
    
    
    TotalOil and gas revenue
    
    $
    12,065
    
    
    $
    35,683
    
    
    $
    47,748
    
    
    $
    14,069
    
    
    $
    15,731
    
    
    $
    29,800
    
    
    $
    9,311
    
    
    $
    8,484
    
    
    $
    17,795Operating costs
    
    
    4,299
    
    
    
    11,834
    
    
    
    16,133
    
    
    
    5,001
    
    
    
    2,602
    
    
    
    7,603
    
    
    
    3,159
    
    
    
    1,914
    
    
    
    5,073Depletion
    
    
    4,858
    
    
    
    20,967
    
    
    
    25,824
    
    
    
    4,756
    
    
    
    8,507
    
    
    
    13,263
    
    
    
    4,428
    
    
    
    2,633
    
    
    
    7,061Provision for impairment
    
    
    7,600
    
    
    
    15,940
    
    
    
    23,540
    
    
    
    2,800
    
    
    
    1,700
    
    
    
    4,500
    
    
    
    15,000
    
    
    
    
    
    
    
    15,000Results of operations from
producing activities
    
    $
    (4,692
    )
    
    $
    (13,058
    )
    
    $
    (17,749
    )
    
    $
    1,512
    
    
    $
    2,922
    
    
    $
    4,434
    
    
    $
    (13,276
    )
    
    $
    3,937
    
    
    $
    (9,339
    )
 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
  MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  
    
    Pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
    
    Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of 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.
 77




---



##### 



/s/ Joseph I. Gasca
    
    /s/ W. Gordon LancasterJoseph I. Gasca
    
    W. Gordon LancasterPresident and Chief Executive Officer
    
    Chief Financial Officer
 REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
 Ivanhoe Energy Inc.:
       78




---



##### 



ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name, Age and
    
    Position with
    
    Present Occupation andMunicipality of Residence
    
    the Registrant
    
    Principal Occupation for the Past Five YearsDAVID R. MARTIN, age 75
Santa Barbara, California
    
    Executive Co-Chairman of the
Board
(since May 2006) and Director
(since
August
1998)
    
    Executive Co-Chairman of the Board, Ivanhoe Energy Inc., (May 2006
 Present); Chairman of the Board, Ivanhoe Energy Inc. (August
1998
 May 2006); President, Cathedral Mountain Corporation (1997 
present)A. ROBERT ABBOUD, age 77
Barrington Hills, IL
    
    Independent Co-Chairman and Lead
Director (since May 2006)
    
    President, A. Robert Abboud and Company, a private investment
company (1984  present)ROBERT M. FRIEDLAND, age 56
Singapore
    
    Deputy Chairman  Capital
Markets (since
June, 1999) and Director (since
February 1995)
    
    Chairman and President, Ivanhoe Capital
Corporation, a Singapore based venture capital company principally
involved in establishing and financing international mining and
exploration companies (1987  present); Chairman and Director,
Ivanhoe Mines Ltd. (March 1994  present)E. LEON DANIEL, age 70
Park City, Utah
    
    Deputy Chairman  Projects and
Engineering, (since May 2006)
and Director (since August
1998)
    
    Deputy Chairman  Projects and Engineering, Ivanhoe Energy Inc.
(May 2006  present); President and Chief Executive Officer,
Ivanhoe Energy Inc. (June, 1999  May 2006)R. EDWARD FLOOD, age 61
Reno, Nevada
    
    Director (since June 1999)
    
    Chairman of the Board, Western Uranium Corporation (March 2007-
present); Director, Ivanhoe Mines Ltd. (May 1999  present);
Deputy Chairman, Ivanhoe Mines Ltd. (May 1999  February 2007);
Mining Analyst, Haywood Securities (May, 1999  September 2001)SHUN-ICHI SHIMIZU, age 67
Tokyo, Japan
    
    Director (since July 1999)
    
    Managing Director of C.U.E. Management
Consulting Ltd. (1994  present)HOWARD R. BALLOCH, age 55
Beijing, China
    
    Director (since January 2002)
    
    President, The Balloch Group (July 2001  present); President,
Canada China Business Council (July 2001  2006); Canadian
Ambassador to China, Mongolia and Democratic Republic of Korea
(April 1996  July 2001)J. STEVEN RHODES, age 55
Los Angeles, California
    
    Director (since December 2003)
    
    Chairman and Chief Executive
Officer, Claiborne -
Rhodes, Inc. (2001  present); Senior Vice President,
First Southwest Company (1999 2001)ROBERT G. GRAHAM, age 53
Ottawa, Ontario
    
    Director (since April 2005)
    
    President and CEO, Ensyn Corporation (April 2005
 present) Chairman and CEO, Ensyn Group (October 1984 April
2005)ROBERT A. PIRRAGLIA, age 57
Belmont, Massachusetts
    
    Director (since April 2005)
    
    Chief Operating Officer and Vice President, Ensyn
Corporation (April 15, 2005  present); Chief Operating
Officer and Vice President, Ensyn Group, Inc.
(September 1998  April 2005)
 79




---



##### 



Name, Age and
    
    Position with
    
    Present Occupation andMunicipality of Residence
    
    the Registrant
    
    Principal Occupation for the Past Five YearsBRIAN DOWNEY, C.M.A. age 65
Lake in the Hills, Illinois
    
    Director (since July 2005)
    
    President, Downey & Associates Management Inc.
(July 1986  present);
Financial Advisor, Lending Solutions, Inc. (January
2002  present); Partner/Owner, Lending
Solutions, Inc. (November 1995  January 2002)JOSEPH I. GASCA, age 50 The
Woodlands, Texas
    
    President and Chief Executive
Officer (since January 2007)
    
    President and Chief Executive Officer, Ivanhoe Energy Inc.
(January 2007  present); President and Chief Operating Officer,
Ivanhoe Energy Inc. (July 2006  January 2007); Region Technical
Director  Europe/Asia BG Group (January 2006  June 2006);
General Manager  Operations; BG Group (August 2004  December
2005); Chief Operating Officer, Mosaic Natural Resources Ltd.
(January 2003  July 2004); President, Star Insight Ltd. (May
2002- July 2004W. GORDON LANCASTER, C.A. age 63
Vancouver, British Columbia
    
    Chief Financial Officer
(since January 2004)
    
    Chief Financial Officer, Ivanhoe Energy Inc. (January 2004 
present); Vice President Finance and Chief
Financial Officer, Xantrex Technology Inc. (July 2003
 December 2003); Vice President Finance and Chief
Financial Officer, Power Measurement, Inc. (August
2000  June 2003)PATRICK CHUA, age 51
Hong Kong, China
    
    Executive Vice-President
(since June 1999)
    
    Executive Vice-President, Ivanhoe Energy
Inc. (June 1999  present); Chairman, Sunwing Energy Ltd. (Bermuda) (April
2004  present); President, Sunwing
Energy Ltd. (Bermuda)
(March 2000  April 2004)GERALD MOENCH, age 58
Lethbridge, Alberta
    
    Executive Vice-President
(since June 1999)
    
    Executive Vice-President, Ivanhoe Energy
Inc. (June, 1999  present); President,
Sunwing Energy Ltd. (Bermuda) (April 2004
 present)
   Business Corporations Act
  80




---



##### 



Other Directorships
  Code of Business Conduct and Ethics
  
 ITEM 11. EXECUTIVE COMPENSATION
 Named Executive Officers
 Summary Compensation Table
  Summary Compensation Table ($U.S.)Annual Compensation
    
    Long Term CompensationAwards
    
    PayoutsSecuritiesUnder
    
    RestrictedOptions/
    
    Shares or
    
    
    
    
    
    All OtherOther
    
    SARs
    
    Restricted
    
    
    
    
    
    Compen-Name and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Annual
    
    Granted
    
    Share
    
    LTIP
    
    sationPrincipal Position
    
    Year
    
    Salary
    
    Bonus (6)
    
    Compensation
    
    (#)
    
    Units
    
    Payouts
    
    (U.S.$) (7)David R. Martin
    
    
    2006
    
    
    
    270,000
    
    
    
    90,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000Executive Co-Chairman (1)
    
    
    2005
    
    
    
    270,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,2002004
    
    
    
    200,000
    
    
    
    60,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,792E. Leon Daniel
    
    
    2006
    
    
    
    340,000
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000Deputy Chairman  Projects and
    
    
    2005
    
    
    
    340,000
    
    
    
    
    
    
    
    
    
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    16,200Engineering (2)
    
    
    2004
    
    
    
    300,000
    
    
    
    90,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,792Joseph I. Gasca
    
    
    2006
    
    
    
    152,417
    
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    9,200President and Chief Executive
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Officer (5)
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    W. Gordon Lancaster
    
    
    2006
    
    
    
    231,000
    
    
    
    80,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Financial Officer (4)
    
    
    2005
    
    
    
    225,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2004
    
    
    
    200,000
    
    
    
    60,000
    
    
    
    
    
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    Patrick Chua
    
    
    2006
    
    
    
    108,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Executive Vice President (3)
    
    
    2005
    
    
    
    144,000
    
    
    
    27,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2004
    
    
    
    144,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gerald Moench
    
    
    2006
    
    
    
    188,760
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    Executive Vice President (3)
    
    
    2005
    
    
    
    174,460
    
    
    
    51,480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2004
    
    
    
    165,000
    
    
    
    41,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 81




---



##### 



(1)
    
    Mr. Martin was appointed Executive Co-Chairman in May 2006 and has been Chairman and
director since August 1998.(2)
    
    Mr. Daniel was appointed Deputy Chairman-Projects and Engineering in May 2006, was President
and Chief Executive Officer from June 1999 until May 2006, and has been a director of the
Company since August 1998.(3)
    
    Mr. Moench and Mr. Chua were appointed as Executive Vice President in June 1999.(4)
    
    Mr. Lancaster was appointed Chief Financial Officer effective January 2004(5)
    
    Mr. Gasca was appointed President and Chief Operating Officer effective July 2006 and was
designated the Chief Executive Officer effective January 29, 2007.(6)
    
    Bonuses earned were paid in cash and common shares from our Employees and Directors Equity
Incentive Plan at fair market value on the date of approval by the Compensation Committee.(7)
    
    Our matching contribution to the 401(k) plan, a U.S. defined contribution retirement plan
available to U.S. employees. Long Term Incentive Plan
  Options and Stock Appreciation Rights (SARs)
 th th
 Option/SAR Grants in Last Fiscal YearMarket Value ofNumber of Securities
    
    Percent of Total
    
    
    
    
    
    SecuritiesUnderlying
    
    Options/ SARs
    
    
    
    
    
    UnderlyingOptions/SARs
    
    Granted to
    
    Exercise
    
    Options/ SARs onGranted
    
    Employees in
    
    or
    
    the Date of Grant
    
    ExpirationName
    
    (#)
    
    Financial Year
    
    Base Price ($/Security)
    
    ($/Security)
    
    Date(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    (f)Joseph I. Gasca
    
    
    1,000,000
    
    
    
    29.2
    %
    
    
    U.S. $2.85
    
    
    
    2,850,000
    
    
    July 5, 2016Gerald Moench
    
    
    100,000
    
    
    
    2.9
    %
    
    
    U.S. $3.06
    
    
    
    306,000
    
    
    March 8, 2011
 Aggregated Option Exercises
  Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option ValuesNumber of Securities
    
    Value of Unexercised In-Underlying Unexercised
    
    the-Money Options atShares Acquired
    
    
    
    
    
    Options at December 31, 2006
    
    December 31, 2006on Exercise
    
    Value Realized
    
    (#)
    
    ($U.S.)Name
    
    (#)
    
    ($U.S.)
    
    Exercisable/Unexercisable
    
    Exercisable/UnexercisableJoseph I. Gasca
    
    
    
    
    
    
    
    
    
    
    250,000/750,000
    
    
    
    W. Gordon Lancaster
    
    
    
    
    
    
    
    
    
    
    200,000/50,000
    
    
    
    David R. Martin
    
    
    
    
    
    
    
    
    
    
    3,400,000/0
    
    
    
    3,131,348/0E. Leon Daniel
    
    
    
    
    
    
    
    
    
    
    366,667/300,000
    
    
    
    153,498/0Gerald Moench
    
    
    
    
    
    
    
    
    
    
    70,000/80,000
    
    
    
    Patrick Chua
    
    
    
    
    
    
    
    
    
    
    60,000/0
    
    
    
    
 Option and SAR Repricings
  Defined Benefit and Actuarial Plan
 4 01(k) Plan
 82




---



##### 



Employment Contracts, Termination of Employment and Change-In-Control Arrangements
      Director Compensation
  Employees and Directors Equity Incentive Plan
 Plan Share Option Plan Share Bonus Plan Share Purchase Plan
  Share Option Plan
  83




---



##### 



Share Bonus Plan
  Share Purchase Plan
     General
   Proposed Amendments
 TSX
 84




---



##### 



Composition of the Compensation Committee
  Report on Executive Compensation
       85




---



##### 



CEO
   86




---



##### 



Performance Graph
  
 As at December 31,(Cdn.$)2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006Ivanhoe Energy Inc.
    
    
    $
    100
    
    
    
    $
    20
    
    
    
    $
    134
    
    
    
    $
    84
    
    
    
    $
    34
    
    
    
    $
    43S&P/TSX Composite
Index
    
    
    $
    100
    
    
    
    $
    88
    
    
    
    $
    111
    
    
    
    $
    127
    
    
    
    $
    158
    
    
    
    $
    185
 87




---



##### 



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 
No. 1 Temasek Avenue
#37-02 Millenia Tower 
Singapore 039192
    
    
    51,011,725
    (2)
    
    
    20.48Common Shares
    
    Directors and Executive Officers as
a Group
(15 persons)
    
    
    64,102,909
    (3)
    
    
    25.74
 
 (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)
    
    50,594,620 common shares are held indirectly through Newstar Securities SRL, Premier Mines
SRL and Evershine SRL, companies controlled by Mr. Friedland.(3)
    
    Includes 5,312,667 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
    
    David R. Martin
    
    
    4,373,069
    
    
    
    1.76
    
    
    
    3,400,000Common Shares
    
    A. Robert Abboud
    
    
    516,000
    
    
    
    0.21
    
    
    
    116,000Common Shares
    
    Robert M. Friedland
    
    
    51,011,725
    (2)
    
    
    20.48
    
    
    Common Shares
    
    E. Leon Daniel
    
    
    1,146,683
    
    
    
    0.46
    
    
    
    466,667Common Shares
    
    R. Edward Flood
    
    
    115,029
    
    
    
    0.05
    
    
    
    90,000Common Shares
    
    Shun-ichi Shimizu
    
    
    120,100
    
    
    
    0.05
    
    
    
    20,000Common Shares
    
    Howard R. Balloch
    
    
    90,000
    
    
    
    0.04
    
    
    
    90,000Common Shares
    
    J. Steven Rhodes
    
    
    201,000
    
    
    
    0.08
    
    
    
    200,000Common Shares
    
    Robert G. Graham
    
    
    5,328,755
    
    
    
    2.14
    
    
    
    110,000Common Shares
    
    Robert A. Pirraglia
    
    
    366,266
    
    
    
    0.15
    
    
    
    140,000Common Shares
    
    Brian Downey
    
    
    80,000
    
    
    
    0.03
    
    
    
    80,000Common Shares
    
    Joseph I. Gasca
    
    
    250,000
    
    
    
    0.10
    
    
    
    250,000Common Shares
    
    W. Gordon Lancaster
    
    
    251,451
    
    
    
    0.10
    
    
    
    200,000Common Shares
    
    Patrick Chua
    
    
    139,712
    
    
    
    0.06
    
    
    
    60,000Common Shares
    
    Gerald Moench
    
    
    113,119
    
    
    
    0.05
    
    
    
    90,000Common Shares
    
    All directors and executive officers as a group
(15 persons)
    
    
    64,102,909
    
    
    
    25.74
    
    
    
    5,312,667
 
 (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)
    
    50,594,620 common shares are held indirectly through Newstar Securities SRL, Premier Mines
SRL and Evershine SRL, companies controlled by Mr. Friedland. Securities Authorized for Issuance under Equity Compensation Plans
  88




---



##### 



Equity Compensation Plan InformationNumber of securities remainingNumber of securities to be issued
    
    Weighted-average exercise
    
    available for future issuance underupon exercise of outstanding options,
    
    price of outstanding options,
    
    equity compensation plans (excludingwarrants and rights
    
    warrants and rights
    
    securities reflected in column (a))Plan category
    
    (a)
    
    (b)
    
    (c)Equity
compensation plans
approved by
Security holders
    
    
    11,369,721
    
    
    Cdn. $2.27
    
    
    1,266,994Equity compensation
plans not approved
by Security holders
(1)
    
    
    1,000,000
    
    
    Cdn. $3.18
    
    
    Total
    
    
    12,369,721
    
    
    Cdn. $2.34
    
    
    1,266,994
 
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORS INDEPENDENCE
 Transactions with Management and Others
  Certain Business Relationships
    
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  Year ended December 31,Cdn.($000)2006
    
    
    2005Audit fees (a)
    
    $
    835
    
    
    $
    751Audit related fees (b)
    
    
    112
    
    
    
    45Tax fees (c)
    
    
    135
    
    
    
    75All other fees (d)
    
    
    
    
    
    
    $
    1,082
    
    
    $
    871
 
 (a)
    
    Fees for audit services billed in 2006 and 2005 consisted of:
 
    
    Audit of our annual financial statements
    
    Reviews of our quarterly financial statements
 89




---



##### 




    
    Comfort letters, statutory and regulatory audits, consents and other services related to
Canadian and U.S. securities regulatory matters
    
    Review of our internal controls over financial reporting in compliance with the
requirements of the Sarbanes Oxley Act of 2002.
 (b)
    
    Fees for audit related services billed in 2006 and 2005 consist of financial and tax analysis
in contemplation of our proposed mergers with China Mineral Acquisition Corporation and Ensyn
Group, Inc., respectively.(c)
    
    Fees for tax services billed in 2006 and 2005 consisted of tax compliance and tax planning
and advice:
 
    
    Fees for tax compliance services totaled Cdn.$71,000 and Cdn.$43,600 in 2006 and 2005,
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 assistanceii.
    
    Preparation of expatriate tax returnsiii.
    
    Assistance with tax return filings in certain foreign jurisdictions
 
    
    Fees for tax planning and advice services totaled Cdn.$64,000 and Cdn.$31,000 in 2006
and 2005, 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:
 i.
    
    Tax advice related to structuring certain proposed mergers, acquisitions
and disposals.
 (d)
    
    All other fees includes fees for services billed in 2006 and 2005 other than the services
reported as Audit fees, Audit related fees, or Tax fees.
  Audit Committee Pre-Approval Policy
  Disclosure Categories Service List
   90




---



##### 



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  Exhibits3.1
    
    Articles of Ivanhoe Energy Inc. as amended to September 28, 2005
(Incorporated by reference to Exhibit 3.1 of Form 10-K filed with
the Securities and Exchange Commission on March 15, 2006)3.2
    
    Bylaws of Ivanhoe Energy Inc. as amended May 15, 2001 and further
amended March 8, 200710.1
    
    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
    
    Strategic Development Alliance Letter Agreement dated September 26,
2002 between Ivanhoe Energy Inc. and CITIC Energy Ltd.
(Incorporated by reference to Exhibit 10.13 of Form 10-K filed with
the Securities and Exchange Commission on March 19, 2003)10.5
    
    Employees and Directors Equity Incentive Plan (Incorporated by
reference to Exhibit 10.15 of Form 10-K filed with the Securities
and Exchange Commission on March 15, 2004)10.6
    
    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).10.7
    
    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)10.8
    
    Terms of Agreement  Conversion of Participating Interest by
Richfirst dated February 18, 2006 among Richfirst Holdings Limited,
Pan-China Resources Limited, Sunwing Energy Ltd. and the Company
(Incorporated by reference to Exhibit 10.2 of Form 8-K filed with
the Securities and Exchange Commission on February 24, 2006)10.9
    
    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).10.10
    
    Employment Agreement dated April 30, 2002 between Ivanhoe Energy
Inc. and E. Leon Daniel (Incorporated by reference to Exhibit 10.21
of Form 10-K filed with the Securities and Exchange Commission on
March 10, 2005)10.11
    
    Employment Agreement dated November 25, 2003 between Ivanhoe Energy
Inc. and W. Gordon Lancaster (Incorporated by reference to Exhibit
10.22 of Form 10-K filed with the Securities and Exchange
Commission on March 10, 2005)
 91




---



##### 



Exhibits10.12
    
    Employment Agreement, dated May 15, 2006 between Ivanhoe Energy
Inc. and Joseph I. Gasca (Incorporate by reference to Exhibit 10.1
of Form 8-K filed with the Securities and Exchange Commission on
May 26, 2006).10.13
    
    Stock Purchase Agreement, dated May 12, 2006 between Ivanhoe Energy
Inc., Sunwing Holding Corporation, Sunwing Energy Ltd and China
Mineral Acquisition Corporation (Incorporated by reference to
Exhibit 10.1 of Form 8-K filed with the Securities and Exchange
Commission on May 17, 2006)10.14
    
    Termination of Stock Purchase Agreement, dated August 31, 2006,
between Ivanhoe Energy Inc., Sunwing Holding Corporation, Sunwing
Energy Ltd. and China Mineral Acquisition Corporation (Incorporated
by reference to Exhibit 99.1 of Form 8-K filed with the Securities
and Exchange Commission on September 1, 2006).14.1
    
    Code of Business Conduct and Ethics (Incorporated by reference to
Exhibit 14.1 of Form 10-K filed with the Securities and Exchange
Commission on March 15, 2004)21.1
    
    Subsidiaries of Ivanhoe Energy Inc.23.1
    
    Consent of GLJ Petroleum Consultants Ltd., Petroleum Engineers23.2
    
    Consent of Netherland, Sewell & Associates, Inc.23.3
    
    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 2002
 92




---



##### 



SIGNATURES
  IVANHOE ENERGY INC.By: /s/ Joseph I. GascaName: Joseph I. GascaTitle: President and Chief
Executive OfficerDated: March 8, 2007
  Signature
    
    Title
    
    Date/s/     JOSEPH I. GASCA
    
    President and Chief Executive Officer
    
    March 8, 2007Joseph I. Gasca
    
    (Principal Executive Officer)/s/     W. GORDON LANCASTER
    
    Chief Financial Officer
    
    March 8, 2007W. Gordon Lancaster
    
    (Principal Financial and Accounting Officer)/s/     DAVID R. MARTIN
    
    Executive Co-Chairman of the Board and Director
    
    March 8, 2007David Martin/s/     A. ROBERT ABBOUD
    
    Independent Co-Chairman and Lead Director
    
    March 8, 2007A. Robert Abboud/s/     ROBERT M. FRIEDLAND
    
    Deputy Chairman  Capital Markets and Director
    
    March 8, 2007Robert M. Friedland/s/     E. LEON DANIEL
    
    Deputy Chairman  Projects and Engineering and Director
    
    March 8, 2007E. Leon Daniel/s/     R. EDWARD FLOOD
    
    Director
    
    March 8, 2007R. Edward Flood/s/     SHUN-ICHI SHIMIZU
    
    Director
    
    March 8, 2007Shun-ichi Shimizu/s/     HOWARD R. BALLOCH
    
    Director
    
    March 8, 2007Howard Balloch/s/     J. STEVEN RHODES
    
    Director
    
    March 8, 2007J. Steven Rhodes/s/     ROBERT G. GRAHAM
    
    Director
    
    March 8, 2007Robert G. Graham/s/     ROBERT A. PIRRAGLIA
    
    Director
    
    March 8, 2007Robert A. Pirraglia/s/     BRIAN DOWNEY
    
    Director
    
    March 8, 2007Brian Downey
 93




---



##### 



EXHIBIT INDEX
 Exhibit No.
    
    Description3.1
    
    Articles of Ivanhoe Energy Inc. as amended to September 28, 2005 (Incorporated by reference to
Exhibit 3.1 of Form 10-K filed with the Securities and Exchange Commission on March 15, 2006)3.2
    
    Bylaws of Ivanhoe Energy Inc. as amended May 15, 2001 and further amended March 8, 200710.1
    
    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
    
    Strategic Development Alliance Letter Agreement dated September 26, 2002 between Ivanhoe Energy Inc.
and CITIC Energy Ltd. (Incorporated by reference to Exhibit 10.13 of Form 10-K filed with the
Securities and Exchange Commission on March 19, 2003)10.5
    
    Employees and Directors Equity Incentive Plan (Incorporated by reference to Exhibit 10.15 of Form
10-K filed with the Securities and Exchange Commission on March 15 , 2004)10.6
    
    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).10.7
    
    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)10.8
    
    Terms of Agreement  Conversion of Participating Interest by Richfirst dated February 18, 2006 among
Richfirst Holdings Limited, Pan-China Resources Limited, Sunwing Energy Ltd. and the Company
(Incorporated by reference to Exhibit 10.2 of Form 8-K filed with the Securities and Exchange
Commission on February 24, 2006)10.9
    
    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)10.10
    
    Employment Agreement dated April 30, 2002 between Ivanhoe Energy Inc. and E. Leon Daniel
(Incorporated by reference to Exhibit 10.21 of Form 10-K filed with the Securities and Exchange
Commission on March 10, 2005)10.11
    
    Employment Agreement dated November 25, 2003 between Ivanhoe Energy Inc. and W. Gordon Lancaster
(Incorporated by reference to Exhibit 10.22 of Form 10-K filed with the Securities and Exchange
Commission on March 10, 2005)10.12
    
    Employment Agreement, dated
May 15, 2006 between Ivanhoe Energy Inc. and Joseph I. Gasca (Incorporated
by reference to Exhibit 10.1 of Form 8-K filed with the Securities and Exchange Commission on May 26,
2006)10.13
    
    Stock Purchase Agreement, dated May 12, 2006 between Ivanhoe Energy Inc., Sunwing Holding
Corporation, Sunwing Energy Ltd and China Mineral Acquisition Corporation (Incorporated by reference
to Exhibit 10.1 of Form 8-K filed with the Securities and Exchange Commission on May 17, 2006)10.14
    
    Termination of Stock Purchase Agreement, dated August 31, 2006, between Ivanhoe Energy Inc., Sunwing
Holding Corporation, Sunwing Energy Ltd. and China Mineral Acquisition Corporation (Incorporated by
reference to Exhibit 99.1 of Form 8-K filed with the Securities and Exchange Commission on September
1, 2006).14.1
    
    Code of Business Conduct and Ethics (Incorporated by reference to Exhibit 14.1 of Form 10-K filed
with the Securities and Exchange Commission on March 15, 2004)21.1
    
    Subsidiaries of Ivanhoe Energy Inc.23.1
    
    Consent of GLJ Petroleum Consultants Ltd., Petroleum Engineers23.2
    
    Consent of Netherland, Sewell & Associates, Inc.23.3
    
    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 2002
 94