##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 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 Place 
Vancouver, 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 Yes
þ No
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
 o Yes þ No
   Class
    
    Outstanding at March 10, 2009Common Shares, no par value
    
    279,381,187 shares
 DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 PagePART IItems 1 and 2 Business and PropertiesGeneral
    
    
    4Corporate Strategy
    
    
    5Integrated Oil and Gas Properties
    
    
    7Conventional Oil and Gas Properties
    
    
    8Business and Technology Development
    
    
    11Certain Factors Affecting the Business
    
    
    13Employees
    
    
    14Production, Wells and Related Information
    
    
    14Item 1A Risk Factors
    
    
    16Item 1B Unresolved Staff Comments
    
    
    22Item 3 Legal Proceedings
    
    
    22Item 4 Submission of Matters to a Vote of Security Holders
    
    
    22PART IIItem 5 Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    23Item 6 Selected Financial Data
    
    
    25Item 7 Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    27Item 7A Quantitative and Qualitative Disclosures About Market Risk
    
    
    46Item 8 Financial Statements and Supplementary Data
    
    
    49Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
    
    
    94Item 9A Controls and Procedures
    
    
    95Item 9B Other Information
    
    
    96PART IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    
    97Item 11 Executive Compensation
    
    
    99Item 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    113Item 13 Certain Relationships and Related Transactions, and Director Independence
    
    
    114Item 14 Principal Accountants Fees and Services
    
    
    115PART IVItem 15 Exhibits, Financial Statement Schedules
    
    
    116Exhibit 10.24Exhibit 10.25Exhibit 21.1Exhibit 23.1Exhibit 23.2Exhibit 23.3Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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CURRENCY AND EXCHANGE RATES
 dollars $ Cdn.$
 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Closing
    
    $
    0.82
    
    
    $
    1.01
    
    
    $
    0.86
    
    
    $
    0.86
    
    
    $
    0.83Low
    
    $
    0.77
    
    
    $
    0.84
    
    
    $
    0.85
    
    
    $
    0.79
    
    
    $
    0.72High
    
    $
    1.01
    
    
    $
    1.09
    
    
    $
    0.91
    
    
    $
    0.87
    
    
    $
    0.85Average Noon
    
    $
    0.94
    
    
    $
    0.94
    
    
    $
    0.88
    
    
    $
    0.83
    
    
    $
    0.77
  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
 SELECT DEFINED TERMS
 Ivanhoe Energy Ivanhoe the Company
 RTP TM Process HTL TM Technology HTL TM
 Syntroleum GTL Technology GTL
 SEC  CSA  Act  EOR  SAGD  MOU  TSX
  3




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##### Table of Contents



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
  AVAILABLE INFORMATION
 www.ivanhoeenergy.com www.sec.gov www.sedar.com
 
 ITEMS 1 AND 2 BUSINESS AND PROPERTIES
 
 GENERAL
 TM
  TM TM
 TM
   4




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##### Table of Contents



Oil and Gas
 Integrated
 TM
 Conventional
  Business and Technology Development
 TM
 TM
 Corporate
 ,
    
 CORPORATE STRATEGY
 Importance of the Heavy Oil Segment of the Oil and Gas Industry
    5




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##### Table of Contents



Ivanhoes Value Proposition
 TM
   1.
    
    Virtual elimination of external energy requirements for steam generation and/or power
for upstream operations.2.
    
    Elimination of the need for diluent or blend oils for transport.3.
    
    Capture of the majority of the heavy versus light oil value differential.
 4.
    
    Relatively small minimum economic scale of operations suited for field upgrading and
for smaller field developments.
 TM
 TM
 Implementation Strategy
   6




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##### Table of Contents



1.
    
    Build a portfolio of major HTLTMprojects.Continue to deploy the personnel
and the financial resources in support of our goal to capture additional opportunities for
development projects utilizing the Companys HTLTM Technology.
 2.
    
    Advance the technology.Additional development work will continue to advance the
technology through the first commercial application and beyond.
 3.
    
    Enhance the Companys financial position in anticipation of major projects.
Implementation of large projects requires significant capital outlays. The Company is
working on various financing plans and establishing the relationships required for the
development activities of the future.
 4.
    
    Build internal capabilities.During 2008, significant progress has been made in
building execution teams in preparation for the Companys first HTLTM projects.
The upstream teams consist of a number of experienced heavy oil petroleum engineers and
geologists complemented by a core team of geotechnical experts. In addition, the Companys
Houston-based HTLTM technology team has been strengthened with the addition of a
number of engineers that have an extensive background in chemical and petroleum refining,
project engineering and the development and management of intellectual property. The
Company expects to continue filling key positions in its execution mode.
 5.
    
    Build the relationships needed for the future.Commercialization of the Companys
technologies demands close alignment with partners, suppliers, host governments and
financiers.
 
 INTEGRATED OIL AND GAS PROPERTIES
 Tamarack Project
 Talisman) Tamarack Project Tamarack
 SOR
 TM
 TM TM
 Ecuador Project
  TM
  7




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##### Table of Contents



TM TM
   
 CONVENTIONAL OIL AND GAS PROPERTIES
   Percentage
    
    
    12/31/2008
    
    
    Percentage of2008
    
    
    of Total
    
    
    Proved
    
    
    Total EstimatedProduction
    
    
    2008
    
    
    Reserves
    
    
    ProvedProperty
    
    Location
    
    (in MBoe)
    
    
    Production
    
    
    (in MBoe)
    
    
    ReservesSouth Midway
    
    Kern County, California
    
    
    189
    
    
    
    27
    %
    
    
    675
    
    
    
    38
    %West Texas
    
    Midland County, Texas
    
    
    13
    
    
    
    2
    %
    
    
    94
    
    
    
    5
    %Other
    
    California
    
    
    2
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Total U.S.
    
    
    
    
    204
    
    
    
    29
    %
    
    
    769
    
    
    
    43
    %Dagang
    
    Hebei Province, China
    
    
    472
    
    
    
    68
    %
    
    
    960
    
    
    
    53
    %Other
    
    China
    
    
    18
    
    
    
    3
    %
    
    
    72
    
    
    
    4
    %Total China
    
    
    
    
    490
    
    
    
    71
    %
    
    
    1,032
    
    
    
    57
    %Total
    
    
    
    
    694
    
    
    
    100
    %
    
    
    1,801
    
    
    
    100
    %
  Special Note to Canadian Investors
 National Instrument 51-101 -
Standards of Disclosure for Oil and Gas Activities NI 51-101
 COGE Handbook
  8




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
    
    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 requires disclosure of reserves and related future net
revenues using forecasted prices, with additional constant pricing disclosure being
optional;
 
    
    the SEC mandates disclosure of proved and proved developed 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.
  United States
 
    
    Production and Development
 South Midway
  West Texas
  Other
    
    
    Exploration
  Knights Landing
   9




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Aera Exploration Agreement
 Aera AMI
 China
 
    
    Production and Development
 CNPC Dagang field
 Richfirst CITIC
 ODP
 WTI
  10




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##### Table of Contents




    
    Exploration
 Zitong Contract Mitsubishi
 Phase 1
 Zitong Partners Phase 2
 
 BUSINESS AND TECHNOLOGY DEVELOPMENT
 Heavy to Light Oil Upgrading
 
    
    RTPTMLicense and Patents
 Ensyn TM TM TM TM TM
 
    
    Feedstock Test Facility
 FTF TM CDF
  11




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
    
    Commercial Demonstration Facility
  VTBs TM TM
 TM
  Business Development
 TM TM TM
 TM TM
  INPEX TM
 TM
 TM
  12




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##### Table of Contents



LNOC
 Gas-to-Liquids Technology
 
    
    Syntroleum License
 Syntroleum Process TM
  
    
    GTL Project
 EGAS HKRE
  
 CERTAIN FACTORS AFFECTING THE BUSINESS
 Competition
   13




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##### Table of Contents



Environmental Regulations
 TM
    Environmental Provisions
  Government Regulations
  
 EMPLOYEES
  
 PRODUCTION, WELLS AND RELATED INFORMATION
   Average Sales Price
    
    
    Average Operating Costs2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Crude Oil and Natural Gas ($/Boe)U.S.
    
    $
    88.67
    
    
    $
    61.71
    
    
    $
    54.86
    
    
    $
    25.14
    
    
    $
    21.72
    
    
    $
    19.54China
    
    $
    98.73
    
    
    $
    64.86
    
    
    $
    62.04
    
    
    $
    43.92
    
    
    $
    26.88
    
    
    $
    20.58
  14




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2008
    
    
    2007
    
    
    2006Oil Wells
    
    
    Gas Wells
    
    
    Oil Wells
    
    
    Gas Wells
    
    
    Oil Wells
    
    
    Gas WellsGross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetU.S.
    
    
    100
    
    
    
    82.9
    
    
    
    2
    
    
    
    0.5
    
    
    
    92
    
    
    
    74.9
    
    
    
    1
    
    
    
    0.2
    
    
    
    89
    
    
    
    73.5
    
    
    
    2
    
    
    
    1.0China
    
    
    44
    
    
    
    36.1
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    36.1
    
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    34.4
    (1)
    
    
    
    
    
    
    
 
 (1)
    
    After giving effect to the 40% farm-in/out of Richfirst to the Dagang field.  Exploratory
 Productive Wells
    
    
    Dry Wells2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    GasU.S.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6
    (1)
    
    
    China
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    0.6
    
    
    
    
 
 (1)
    
    Includes 0.6 (1 gross) net exploratory wells drilled during 2005 which were determined to be
dry in 2006. Development
 Productive Wells
    
    
    Dry Wells2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    Gas
    
    
    Oil
    
    
    GasU.S.
    
    
    8.7
    (1)
    
    
    0.2
    
    
    
    1.2
    
    
    
    
    
    
    
    9.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    China
    
    
    
    
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    8.7
    
    
    
    0.2
    
    
    
    5.3
    
    
    
    
    
    
    
    9.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Includes 0.5 (2 gross) net development wells not included in the commercially productive wells
table above as these wells are waiting to be steamed. Wells in Progress
  Acreage
  Developed Acres
    
    
    Undeveloped AcresGross
    
    
    Net
    
    
    Gross
    
    
    NetU.S.
    
    
    6,011
    
    
    
    3,440
    
    
    
    69,003
    
    
    
    16,452China (1)
    
    
    1,490
    
    
    
    1,222
    
    
    
    752,697
    
    
    
    676,928
 
 (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.  15




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##### Table of Contents



ITEM 1A. RISK FACTORS
  We may not be able to meet our substantial capital requirements.
 TM TM
 We have fixed and contingent payment obligations to Talisman Energy
  Our HTL TM projects in Canada and Ecuador are at a very early stage of development
  Heavy oil exploration and development involves increased operational risks.
   16




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We might not successfully commercialize our technology, and commercial-scale HTL TM plants based on our technology may never be successfully constructed or operated.
 TM TM TM
 Our efforts to commercialize our HTL TM Technology may give rise to claims of
infringement upon the patents or proprietary rights of others .
 TM
 Technological advances could significantly decrease the cost of upgrading heavy oil and, if we are
unable to adopt or incorporate technological advances into our operations, our HTL TM Technology could become uncompetitive or obsolete.
 TM TM TM
 The development of alternate sources of energy could lower the demand for our HTL TM Technology.
 TM TM
 The volatility of oil prices may affect our financial results.
    17




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Lower oil prices could negatively impact our ability to borrow.
  We may be required to take write-downs if oil prices decline, our estimated development costs
increase or our exploration results deteriorate.
  Our ability to sell assets and replace revenues generated from any sale of our existing properties
depends upon market conditions and numerous uncertainties.
 TM TM
 Our heavy oil project in Canada may be exposed to title risks and aboriginal claims.
   Our investment in Ecuador may be at risk if the agreement through which we hold our interest in the
Block 20 project is challenged or cannot be enforced.
   18




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Estimates of proved reserves and future net revenue may change if the assumptions on which such
estimates are based prove to be inaccurate.
  No reserves have yet been established in respect of our HTL TM projects in Canada and
Ecuador.
  Information in this document regarding our future plans reflects our current intent and is subject
to change.
 TM
  Our business may be harmed if we are unable to retain our interests in licenses, leases and
production sharing contracts.
   19




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We may incur significant costs on exploration or development efforts which may prove unsuccessful
or unprofitable.
  Our business involves many operating risks that can cause substantial losses; insurance may not
protect us against all these risks.
   Changes to laws, regulations and government policies in Canada or Ecuador could adversely affect
our ability to develop our HTL TM projects.
 TM
   Complying with environmental and other government regulations could be costly and could negatively
impact our production.
   20




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##### Table of Contents



TM TM
 We compete for oil and gas properties with many other exploration and development companies
throughout the world who have access to greater resources.
  Our principal shareholder may significantly influence our business.
   If we lose our key management and technical personnel, our business may suffer .
   21




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##### Table of Contents



ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   22




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Market Information
  NASDAQ CAPITAL MARKET (IVAN)
(U.S.$)
 2008
    
    
    20074th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr
    
    
    4th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st QtrHigh
    
    
    1.43
    
    
    
    3.51
    
    
    
    3.77
    
    
    
    1.97
    
    
    
    2.45
    
    
    
    2.25
    
    
    
    2.65
    
    
    
    2.16Low
    
    
    0.35
    
    
    
    1.21
    
    
    
    1.79
    
    
    
    1.24
    
    
    
    1.43
    
    
    
    1.77
    
    
    
    1.67
    
    
    
    1.19
 TSX (IE)
(CDN$)
 2008
    
    
    20074th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr
    
    
    4th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st QtrHigh
    
    
    1.53
    
    
    
    3.37
    
    
    
    3.85
    
    
    
    1.99
    
    
    
    2.33
    
    
    
    2.36
    
    
    
    2.99
    
    
    
    2.53Low
    
    
    0.43
    
    
    
    1.28
    
    
    
    1.82
    
    
    
    1.27
    
    
    
    1.43
    
    
    
    1.88
    
    
    
    1.84
    
    
    
    1.40
  Exemptions from Certain NASDAQ Marketplace Rules
    Enforceability of Civil Liabilities
  Holders of Common Shares
   23




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Dividends
 Yukon Business Corporations Act
 Exchange Controls and Taxation
  Investment Canada Act Investment Act Canadian WTO investor
  Income Tax Act Convention
 Securities Authorized for Issuance under Equity Compensation Plans
   24




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##### Table of Contents



Performance Graph
  Sales of Unregistered Securities
  Act
 
    
    in November 2007, we issued 2,000,000 common shares under Rule 903 of the Act at a price
of U.S.$2.00 to an institutional investor pursuant to the exercise of previously issued
share purchase warrants.
  
    
    in February 2006, we issued 8,591,434 common shares under Rule 903 of the Act to CITIC
in exchange for an additional 40% working interest in the Dagang field.
 
    
    in March 2006, we issued 100 common shares under Rule 903 of the Act at a price of
U.S.$3.20 to an institutional investor pursuant to the exercise of previously issued share
purchase warrants.
 
    
    in April 2006, we issued 11,400,000 special warrants under Rule 903 of the Act at
U.S.$2.23 per special warrant to institutional and individual investors. 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 TSX and the exercise price
was changed to Cdn.$2.93.
 
 ITEM 6. SELECTED FINANCIAL DATA
 GAAP
  December 312008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(stated in thousands of US dollars, except per share amounts)Results of OperationsRevenues
    
    
    69,166
    
    
    
    33,517
    
    
    
    48,100
    
    
    
    29,939
    
    
    
    17,997Net loss
    
    
    (34,193
    )(1)
    
    
    (39,207
    )(1)
    
    
    (25,492
    )(1)
    
    
    (13,512
    )(1)
    
    
    (20,725
    )(1)Net loss per share  basic and diluted
    
    
    (0.13
    )
    
    
    (0.16
    )
    
    
    (0.11
    )
    
    
    (0.07
    )
    
    
    (0.12
    )Financial PositionTotal assets
    
    
    317,275
    
    
    
    236,916
    
    
    
    248,544
    
    
    
    240,877
    
    
    
    118,486Long-term debt
    
    
    37,855
    
    
    
    9,812
    
    
    
    4,237
    
    
    
    4,972
    
    
    
    2,639Shareholders equity
    
    
    257,427
    
    
    
    197,287
    
    
    
    228,386
    
    
    
    204,767
    
    
    
    103,586Common shares outstanding (in thousands)
    
    
    279,381
    
    
    
    244,873
    
    
    
    241,216
    
    
    
    220,779
    
    
    
    169,665Cash FlowCash provided by operating activities
    
    
    17,053
    
    
    
    5,489
    
    
    
    14,352
    
    
    
    9,870
    
    
    
    4,032Capital investments
    
    
    (25,606
    )
    
    
    (31,638
    )
    
    
    (17,842
    )
    
    
    (43,282
    )
    
    
    (46,454
    )
 
 (1)
    
    Includes asset write-downs and provisions for impairment of $17.7 million, $6.1 million, $5.4
million, $5.6 million and $16.6 million for 2008, 2007, 2006, 2005 and 2004, respectively. See
Note 4 to our financial statements under Item 8 in this Annual Report on Form 10-K.  25




---



##### Table of Contents



Reconciliation to U.S. GAAP
   December 312008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(stated in thousands of US dollars, except per share amounts)Results of OperationsNet loss
    
    
    (63,051
    ) (1)
    
    
    (27,392
    ) (1)
    
    
    (42,421
    ) (1)
    
    
    (12,106
    ) (1)
    
    
    (19,696
    ) (1)Net loss per share  basic and diluted
    
    
    (0.24
    )
    
    
    (0.11
    )
    
    
    (0.18
    )
    
    
    (0.06
    )
    
    
    (0.12
    )Financial PositionTotal assets
    
    
    263,247
    
    
    
    216,656
    
    
    
    216,365
    
    
    
    224,935
    
    
    
    105,791Long-term debt
    
    
    40,392
    
    
    
    10,412
    
    
    
    4,237
    
    
    
    4,972
    
    
    
    2,639Shareholders equity
    
    
    199,741
    
    
    
    170,545
    
    
    
    189,829
    
    
    
    188,745
    
    
    
    90,892Cash FlowCash provided by operating activities
    
    
    16,639
    
    
    
    11,501
    
    
    
    13,340
    
    
    
    5,042
    
    
    
    2,222Capital investments
    
    
    (25,192
    )
    
    
    (31,371
    )
    
    
    (16,830
    )
    
    
    (38,454
    )
    
    
    (44,644
    )
 
 (1)
    
    Includes asset write-downs and provisions for impairment of $54.9 million, $5.9 million,
$23.5 million, $4.5 million and $15.0 million for 2008, 2007, 2006, 2005 and 2004,
respectively. See Note 19 to our financial statements under Item 8 in this Annual Report on
Form 10-K.  26




---



##### Table of Contents



ITEM 7.

    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 TABLE OF CONTENTS
 PageIvanhoe Energys Business
    
    
    28Executive Overview of 2008 Results
    
    
    28Financial Results  Year to Year Change in Net Loss
    
    
    30Revenues and Operating Costs
    
    
    31General and Administrative
    
    
    34Business and Technology Development
    
    
    35Net Interest
    
    
    36Unrealized Gain (Loss) on Derivative Instruments
    
    
    36Depletion and Depreciation
    
    
    36Provision for Impairment of GTL Intangible Assets and Development Costs
    
    
    38Write-off of Deferred Financing Costs
    
    
    38Provision for Impairment of Oil and Gas Properties
    
    
    38Financial Condition, Liquidity and Capital Resources
    
    
    38Sources and Uses of Cash
    
    
    38Outlook for 2009
    
    
    40Contractual Obligations and Commitments
    
    
    41Critical Accounting Principles and Estimates
    
    
    412008 Accounting Changes
    
    
    44Impact of New and Pending Canadian GAAP Accounting Standards
    
    
    44Convergence of Canadian GAAP with International Financial Reporting Standards
    
    
    45Impact of New and Pending U.S. GAAP Accounting Standards
    
    
    45Off Balance Sheet Arrangements
    
    
    46Related Party Transactions
    
    
    46
 GAAP
   27




---



##### Table of Contents



Ivanhoe Energys Business
 TM
 TM TM TM TM
 TM TM TM
 
 Executive Overview of 2008 Results
  Tamarack Pungarayacu
    28




---



##### Table of Contents



Oil and Gas
 Integrated
 TM
 Conventional
  Business and Technology Development
 TM
 TM
 Corporate
 ,
  Year ended December 31,2008
    
    
    2007
    
    
    2006Oil and gas revenue
    
    $
    66,490
    
    
    $
    43,635
    
    
    $
    47,748Net loss
    
    $
    (34,193
    )
    
    $
    (39,207
    )
    
    $
    (25,492
    )Net loss per share  basic and diluted
    
    $
    (0.13
    )
    
    $
    (0.16
    )
    
    $
    (0.11
    )Average production (Boe/d)
    
    
    1,897
    
    
    
    1,870
    
    
    
    2,178Net operating revenue per Boe
    
    $
    57.38
    
    
    $
    38.56
    
    
    $
    39.77Cash flow provided by operating activities
    
    $
    17,053
    
    
    $
    5,489
    
    
    $
    14,352Capital investments
    
    $
    (25,606
    )
    
    $
    (31,638
    )
    
    $
    (17,842
    )
  29




---



##### Table of Contents



Financial Results  Year to Year Change in Net Loss
  Favorable





    
    
    






    Favorable(Unfavorable)
    
    
    
    
    
    
    (Unfavorable)2008
    
    
    Variances
    
    
    2007
    
    
    Variances
    
    
    2006Summary of Net Loss by Significant Components:Oil and Gas Revenues:
    
    $
    66,490
    
    
    
    
    
    
    $
    43,635
    
    
    
    
    
    
    $
    47,748Production volumes
    
    
    
    
    
    $
    717
    
    
    
    
    
    
    $
    (6,732
    )Oil and gas prices
    
    
    
    
    
    
    22,138
    
    
    
    
    
    
    
    2,619Realized gain (loss) on derivative instruments
    
    
    (9,625
    )
    
    
    (7,977
    )
    
    
    (1,648
    )
    
    
    (1,717
    )
    
    
    69Operating costs
    
    
    (26,652
    )
    
    
    (9,333
    )
    
    
    (17,319
    )
    
    
    (1,186
    )
    
    
    (16,133
    )General and administrative, less
stock based compensation
    
    
    (15,202
    )
    
    
    (5,830
    )
    
    
    (9,372
    )
    
    
    (1,724
    )
    
    
    (7,648
    )Business and technology development,
less stock based compensation
    
    
    (5,885
    )
    
    
    2,715
    
    
    
    (8,600
    )
    
    
    (1,379
    )
    
    
    (7,221
    )Net interest
    
    
    (815
    )
    
    
    (503
    )
    
    
    (312
    )
    
    
    (283
    )
    
    
    (29
    )Current income tax provision
    
    
    (656
    )
    
    
    (656
    )
    
    
    
    
    
    
    
    
    
    
    Unrealized gain (loss) on derivative instruments
    
    
    11,591
    
    
    
    20,530
    
    
    
    (8,939
    )
    
    
    (8,446
    )
    
    
    (493
    )Depletion and depreciation
    
    
    (31,904
    )
    
    
    (5,380
    )
    
    
    (26,524
    )
    
    
    6,026
    
    
    
    (32,550
    )Stock based compensation
    
    
    (3,554
    )
    
    
    175
    
    
    
    (3,729
    )
    
    
    (808
    )
    
    
    (2,921
    )Provision for impairment of GTL intangible
assets and development costs
    
    
    (15,054
    )
    
    
    (15,054
    )
    
    
    
    
    
    
    
    
    
    
    Impairment of oil and gas properties
    
    
    
    
    
    
    6,130
    
    
    
    (6,130
    )
    
    
    (710
    )
    
    
    (5,420
    )Write off of deferred financing costs
    
    
    (2,621
    )
    
    
    (2,621
    )
    
    
    
    
    
    
    
    
    
    
    Acquisition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    736
    
    
    
    (736
    )Other
    
    
    (306
    )
    
    
    (37
    )
    
    
    (269
    )
    
    
    (111
    )
    
    
    (158
    )Net Loss
    
    $
    (34,193
    )
    
    $
    5,014
    
    
    $
    (39,207
    )
    
    $
    (13,715
    )
    
    $
    (25,492
    )
     30




---



##### Table of Contents



Revenues and Operating Costs
  Years ended December 31,
    
    
    Years ended December 31,Net Boes
    
    
    Percentage
    
    
    Net Boes
    
    
    Percentage2008
    
    
    2007
    
    
    Change
    
    
    2007
    
    
    2006
    
    
    ChangeChina:Dagang
    
    
    471,817
    
    
    
    464,206
    
    
    
    2
    %
    
    
    464,206
    
    
    
    554,185
    
    
    
    -16
    %Daqing
    
    
    18,096
    
    
    
    19,379
    
    
    
    -7
    %
    
    
    19,379
    
    
    
    20,946
    
    
    
    -7
    %489,913
    
    
    
    483,585
    
    
    
    1
    %
    
    
    483,585
    
    
    
    575,131
    
    
    
    -16
    %U.S.:South Midway
    
    
    188,911
    
    
    
    177,745
    
    
    
    6
    %
    
    
    177,745
    
    
    
    188,379
    
    
    
    -6
    %Spraberry
    
    
    13,484
    
    
    
    19,587
    
    
    
    -31
    %
    
    
    19,587
    
    
    
    23,242
    
    
    
    -16
    %Others
    
    
    1,960
    
    
    
    1,512
    
    
    
    30
    %
    
    
    1,512
    
    
    
    8,309
    
    
    
    -82
    %204,355
    
    
    
    198,844
    
    
    
    3
    %
    
    
    198,844
    
    
    
    219,930
    
    
    
    -10
    %694,268
    
    
    
    682,429
    
    
    
    2
    %
    
    
    682,429
    
    
    
    795,061
    
    
    
    -14
    %
      Year Ended
    
    
    Favorable
    
    
    Year Ended
    
    
    Favorable
    
    
    Year EndedDecember 31,
    
    
    (Unfavorable)
    
    
    December 31,
    
    
    (Unfavorable)
    
    
    December 31,2008
    
    
    Variances
    
    
    2007
    
    
    Variances
    
    
    2006China
    
    $
    (4,430
    )
    
    $
    (4,096
    )
    
    $
    (334
    )
    
    $
    (334
    )
    
    $
    U.S.
    
    
    (5,195
    )
    
    
    (3,881
    )
    
    $
    (1,314
    )
    
    
    (1,383
    )
    
    
    69$
    (9,625
    )
    
    $
    (7,977
    )
    
    $
    (1,648
    )
    
    $
    (1,717
    )
    
    $
    69
 Windfall Levy
  31




---



##### Table of Contents



China
 
    
    Production Volumes 2008 vs. 2007
  
    
    Production Volumes 2007 vs. 2006
  
    
    Operating Costs 2008 vs. 2007
  PRC Windfall Levy Measures
  
    
    Operating Costs 2007 vs. 2006
  U.S.
 
    
    Production Volumes 2008 vs. 2007
   32




---



##### Table of Contents




    
    Production Volumes 2007 vs. 2006
  
    
    Operating Costs 2008 vs. 2007
  
    
    Operating Costs 2007 vs. 2006
    33




---



##### Table of Contents



Year ended December 31,2008
    
    
    2007
    
    
    2006China
    
    
    U.S.
    
    
    Total
    
    
    China
    
    
    U.S.
    
    
    Total
    
    
    China
    
    
    U.S.
    
    
    TotalNet Production:Boe
    
    
    489,913
    
    
    
    204,355
    
    
    
    694,268
    
    
    
    483,585
    
    
    
    198,844
    
    
    
    682,429
    
    
    
    575,131
    
    
    
    219,930
    
    
    
    795,061Boe/day for the period
    
    
    1,339
    
    
    
    558
    
    
    
    1,897
    
    
    
    1,325
    
    
    
    545
    
    
    
    1,870
    
    
    
    1,576
    
    
    
    603
    
    
    
    2,178
 Per Boe
    
    
    Per Boe
    
    
    Per BoeOil and gas revenue
    
    $
    98.73
    
    
    $
    88.67
    
    
    $
    95.77
    
    
    $
    64.86
    
    
    $
    61.71
    
    
    $
    63.94
    
    
    $
    62.04
    
    
    $
    54.86
    
    
    $
    60.06Field operating costs
    
    
    21.70
    
    
    
    19.62
    
    
    
    21.09
    
    
    
    18.08
    
    
    
    15.41
    
    
    
    17.30
    
    
    
    14.07
    
    
    
    14.44
    
    
    
    14.17Windfall Levy (China) and 
 Production tax (U.S.)
    
    
    21.14
    
    
    
    1.31
    
    
    
    15.30
    
    
    
    7.68
    
    
    
    1.25
    
    
    
    5.81
    
    
    
    5.74
    
    
    
    1.15
    
    
    
    4.47Engineering and
support costs
    
    
    1.08
    
    
    
    4.21
    
    
    
    2.00
    
    
    
    1.12
    
    
    
    5.06
    
    
    
    2.27
    
    
    
    0.77
    
    
    
    3.95
    
    
    
    1.6543.92
    
    
    
    25.14
    
    
    
    38.39
    
    
    
    26.88
    
    
    
    21.72
    
    
    
    25.38
    
    
    
    20.58
    
    
    
    19.54
    
    
    
    20.29Net operating revenue
    
    
    54.81
    
    
    
    63.53
    
    
    
    57.38
    
    
    
    37.98
    
    
    
    39.99
    
    
    
    38.56
    
    
    
    41.46
    
    
    
    35.32
    
    
    
    39.77Depletion
    
    
    47.22
    
    
    
    29.88
    
    
    
    42.12
    
    
    
    39.73
    
    
    
    29.38
    
    
    
    36.71
    
    
    
    40.57
    
    
    
    24.23
    
    
    
    36.05Net revenue (loss)
from operations
    
    $
    7.59
    
    
    $
    33.65
    
    
    $
    15.26
    
    
    $
    (1.75
    )
    
    $
    10.61
    
    
    $
    1.85
    
    
    $
    0.89
    
    
    $
    11.09
    
    
    $
    3.72
 
 General and Administrative
  2008 vs.
    
    
    2007 vs.2007
    
    
    2006Favorable (unfavorable) variances:Oil and Gas Activities:Canada
    
    $
    (1,653
    )
    
    $
    Ecuador
    
    
    (658
    )
    
    
    China
    
    
    (204
    )
    
    
    (705
    )U.S.
    
    
    (393
    )
    
    
    (342
    )Corporate
    
    
    (3,206
    )
    
    
    (849
    )(6,114
    )
    
    
    (1,896
    )Less: stock based compensation
    
    
    284
    
    
    
    172$
    (5,830
    )
    
    $
    (1,724
    )
 
    
    General and Administrative 2008 vs. 2007
 Canada
  Ecuador
   34




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##### Table of Contents



China
  U.S.
  Corporate
  
    
    General and Administrative 2007 vs. 2006
 China
  U.S.
 TM
 Corporate
 SOX
 
 Business and Technology Development
  
    
    Business and Technology Development 2008 vs. 2007
 TM
  35




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##### Table of Contents




    
    Business and Technology Development 2007 vs. 2006
 TM TM TM TM TM TM
 
 Net Interest
 
    
    Net Interest 2008 vs. 2007
  
    
    Net Interest 2007 vs. 2006
  
 Unrealized Gain (Loss) on Derivative Instruments
   Year Ended
    
    
    Favorable
    
    
    Year Ended
    
    
    Favorable
    
    
    Year EndedDecember 31,
    
    
    (Unfavorable)
    
    
    December 31,
    
    
    (Unfavorable)
    
    
    December 31,2008
    
    
    Variances
    
    
    2007
    
    
    Variances
    
    
    2006China
    
    $
    6,117
    
    
    $
    10,776
    
    
    $
    (4,659
    )
    
    $
    (4,659
    )
    
    $
    U.S.
    
    
    5,474
    
    
    
    9,754
    
    
    
    (4,280
    )
    
    
    (3,787
    )
    
    
    (493
    )$
    11,591
    
    
    $
    20,530
    
    
    $
    (8,939
    )
    
    $
    (8,446
    )
    
    $
    (493
    )
 
 Depletion and Depreciation
   36




---



##### Table of Contents




    
    Depletion and Depreciation 2008 vs. 2007
  China
  U.S.
  Business and Technology Development
  
    
    Depletion and Depreciation 2007 vs. 2006
  China
   U.S.
   Business and Technology Development
   37




---



##### Table of Contents



Provision for Impairment of GTL Intangible Assets and Development Costs
   
 Write-off of Deferred Financing Costs
  
 Provision for Impairment of Oil and Gas Properties
  
    
    Impairment of Oil and Gas Properties 2008 vs. 2007
  
    
    Impairment of Oil and Gas Properties 2007 vs. 2006
  
 Financial Condition, Liquidity and Capital Resources
 
 Sources and Uses of Cash
  
    
    Operating Activities
  
    
    Investing Activities
   38




---



##### Table of Contents



For the Year Ended
    
    
    For the Year EndedDecember 31,
    
    
    December 31,(Increase)
    
    
    
    
    
    
    
    
    
    
    (Increase)2008
    
    
    2007
    
    
    Decrease
    
    
    2007
    
    
    2006
    
    
    DecreaseOil and Gas Activities:Canada
    
    $
    6,484
    
    
    $
    
    
    
    $
    (6,484
    )
    
    $
    
    
    
    $
    
    
    
    $
    Ecuador
    
    
    1,369
    
    
    
    
    
    
    
    (1,369
    )
    
    
    
    
    
    
    
    
    
    
    China
    
    
    8,378
    
    
    
    23,488
    
    
    
    15,110
    
    
    
    23,488
    
    
    
    9,086
    
    
    
    (14,402
    )U.S.
    
    
    4,542
    
    
    
    3,052
    
    
    
    (1,490
    )
    
    
    3,052
    
    
    
    5,550
    
    
    
    2,498Business and
Technology Development
    
    
    4,833
    
    
    
    5,098
    
    
    
    265
    
    
    
    5,098
    
    
    
    3,206
    
    
    
    (1,892
    )$
    25,606
    
    
    $
    31,638
    
    
    $
    6,032
    
    
    $
    31,638
    
    
    $
    17,842
    
    
    $
    (13,796
    )
 Canada
  Ecuador
 TM
 China
  U.S.
  Business and Technology Development
 FTF
 
    
    Financing Activities
 Special Warrants Offering
  39




---



##### Table of Contents



Outlook for 2009
 TM
     40




---



##### Table of Contents



Contractual
Obligations and Commitments
  Payments Due by Year(stated in thousands of U.S. dollars)Total
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    After 2012Consolidated Balance Sheets:Note payable  current portion
    
    $
    5,612
    
    
    $
    5,612
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Long term debt
    
    
    37,855
    
    
    
    
    
    
    
    6,549
    
    
    
    31,306
    
    
    
    
    
    
    
    Asset retirement obligation
    
    
    3,738
    
    
    
    15
    
    
    
    1,928
    
    
    
    
    
    
    
    
    
    
    
    1,795Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    Other Commitments:Interest payable
    
    
    8,238
    
    
    
    3,165
    
    
    
    2,884
    
    
    
    2,189
    
    
    
    
    
    
    
    Lease commitments
    
    
    3,337
    
    
    
    1,191
    
    
    
    1,009
    
    
    
    680
    
    
    
    331
    
    
    
    126Zitong exploration commitment
    
    
    24,694
    
    
    
    13,123
    
    
    
    11,571
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    85,374
    
    
    $
    23,106
    
    
    $
    23,941
    
    
    $
    34,175
    
    
    $
    2,231
    
    
    $
    1,921
  
 Critical Accounting Principles and Estimates
    Full Cost Accounting AcG
16
   Oil and Gas Reserves
  41




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##### Table of Contents




    
    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 2008, oil and gas depletion of $29.2 million was recorded in depletion and
depreciation expense. If our reserve estimates changed by 10%, our depletion and
depreciation expense for 2008 would have changed by approximately $2.3 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.
    (1)
    
    Proved oil and gas reserves are the estimated quantities of natural gas, crude oil,
condensate and natural gas liquids that geological and engineering data demonstrate with
reasonable certainty can be recoverable in future years from known reservoirs under existing
economic and operating conditions. Reservoirs are considered proved if economic recoverability is
supported by either actual production or a conclusive formation test. Probable reserves are
those additional reserves that are less likely to be recovered than proved reserves. It is equally
likely that the actual remaining quantities recovered will be greater or less than the sum of
estimated proved plus probable reserves. Depletion 
   Impairment of Proved Oil and Gas Properties 
  42




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##### Table of Contents



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




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##### Table of Contents



TM
  Intangible Assets  TM TM TM TM TM
  
 2008 Accounting Changes
 CICA S.1535 S.3862 S.3863
 
 Impact of New and Pending Canadian GAAP Accounting Standards
 S.3064 S.3062
  44




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##### Table of Contents



Convergence of Canadian GAAP with International Financial Reporting Standards
 IFRS
  IASB
 
 Impact of New and Pending U.S. GAAP Accounting Standards
 SFAS No. 161
 SFAS No. 157
  45




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##### Table of Contents



Off Balance Sheet Arrangements
  
 Related Party Transactions
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  NON-TRADING
 Equity Market Risks
   Commodity Price Risk
   46




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##### Table of Contents



(1)
 (1)
    
    The recoverable value of probable reserves is included only for the measurement of the
impairment of the carrying value of oil and gas properties as required under Canadian GAAP but not
for U.S. GAAP. Additionally, U.S. GAAP requires the use of period end oil and gas prices to measure
the amount of the impairment rather than estimated future oil and gas prices as required by
Canadian GAAP. See Critical Accounting Principles and Estimates for the difference between
Canadian and U.S. GAAP in calculating the impairment provision for oil and gas properties. Foreign Currency Rate Risk
  Interest Rate Risk
   47




---



##### Table of Contents



Credit Risk
 TM
 Liquidity Risk
  TRADING
   48




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Index to Financial Statements and Related Information
 PageReport of Independent Registered Chartered Accountants
    
    
    50Consolidated Financial StatementsConsolidated Balance Sheets
    
    
    51Consolidated Statements of Operations and Comprehensive Loss
    
    
    52Consolidated Statements of Shareholders Equity
    
    
    53Consolidated Statements of Cash Flows
    
    
    54Notes to the Consolidated Financial Statements
    
    
    55Quarterly Financial Data in Accordance with Canadian and U.S. GAAP (Unaudited)
    
    
    90Supplementary Disclosures About Oil and Gas Production Activities (Unaudited)
    
    
    90
  49




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
 Ivanhoe Energy Inc.:
     Internal ControlIntegrated Framework
  
  50




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Consolidated Balance Sheets
  As at December 31,2008
    
    
    2007AssetsCurrent Assets:Cash and cash equivalents (Note 12)
    
    $
    39,265
    
    
    $
    11,356Accounts receivable (Note 12)
    
    
    4,870
    
    
    
    9,376Advance (Note 12)
    
    
    
    
    
    
    825Prepaid and other current assets
    
    
    1,658
    
    
    
    602Derivative instruments (Note 12)
    
    
    2,159
    
    
    
    47,952
    
    
    
    22,159Oil and gas properties and development costs, net (Note 3)
    
    
    176,550
    
    
    
    111,853Intangible assets  technology (Note 4)
    
    
    92,153
    
    
    
    102,153Long term assets
    
    
    620
    
    
    
    751$
    317,275
    
    
    $
    236,916Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable and accrued liabilities (Note 12)
    
    $
    10,093
    
    
    $
    9,538Income tax payable (Note 12)
    
    
    650
    
    
    
    Debt  current portion (Note 5 and 12)
    
    
    5,612
    
    
    
    6,729Derivative instruments (Note 12)
    
    
    
    
    
    
    9,43216,355
    
    
    
    25,699Long term debt (Note 5 and 12)
    
    
    37,855
    
    
    
    9,812Asset retirement obligations (Note 6)
    
    
    3,738
    
    
    
    2,218Long term obligation (Note 7)
    
    
    1,900
    
    
    
    1,90059,848
    
    
    
    39,629Commitments and contingencies (Note 7)Going concern and basis of presentation (Note 2)Shareholders Equity:Share capital, issued 279,381,187 common shares;December 31, 2007 244,873,349 common shares
    
    
    413,857
    
    
    
    324,262Purchase warrants (Note 8)
    
    
    18,805
    
    
    
    23,078Contributed surplus
    
    
    16,862
    
    
    
    9,937Convertible note (Note 8)
    
    
    2,086
    
    
    
    Accumulated deficit
    
    
    (194,183
    )
    
    
    (159,990
    )257,427
    
    
    
    197,287$
    317,275
    
    
    $
    236,916
  Approved by the Board:
 (signed) Robert M. Friedland
    
    (signed) Brian F. DowneyDirector
    
    Director
  51




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Consolidated Statements of Operations and Comprehensive Loss
 Year Ended December 31,2008
    
    
    2007
    
    
    2006RevenueOil and gas revenue (Note 12)
    
    $
    66,490
    
    
    $
    43,635
    
    
    $
    47,748Gain (loss) on derivative instruments (Note 12)
    
    
    1,966
    
    
    
    (10,587
    )
    
    
    (424
    )Interest income
    
    
    710
    
    
    
    469
    
    
    
    77669,166
    
    
    
    33,517
    
    
    
    48,100ExpensesOperating costs
    
    
    26,652
    
    
    
    17,319
    
    
    
    16,133General and administrative
    
    
    18,190
    
    
    
    12,076
    
    
    
    10,180Business and technology development
    
    
    6,453
    
    
    
    9,625
    
    
    
    7,610Depletion and depreciation
    
    
    31,904
    
    
    
    26,524
    
    
    
    32,550Interest expense and financing costs
    
    
    1,829
    
    
    
    1,050
    
    
    
    963Provision for impairment of GTL intangible asset and development costs (Notes 3 and 4)
    
    
    15,054
    
    
    
    
    
    
    
    Write off of deferred financing costs (Note 13)
    
    
    2,621
    
    
    
    
    
    
    
    Provision for impairment of oil and gas properties (Note 3)
    
    
    
    
    
    
    6,130
    
    
    
    5,420Write off of deferred acquisition costs
    
    
    
    
    
    
    
    
    
    
    736102,703
    
    
    
    72,724
    
    
    
    73,592Loss before Income Taxes
    
    
    (33,537
    )
    
    
    (39,207
    )
    
    
    (25,492
    )Current provision for income taxes (Note 14)
    
    
    (656
    )
    
    
    
    
    
    
    Net Loss and Comprehensive Loss
    
    $
    (34,193
    )
    
    $
    (39,207
    )
    
    $
    (25,492
    )Net Loss per share  Basic and Diluted
    
    $
    (0.13
    )
    
    $
    (0.16
    )
    
    $
    (0.11
    )Weighted Average Number of Shares (in thousands)Basic and Diluted(Note 15)
    
    
    258,815
    
    
    
    242,362
    
    
    
    235,640
   52




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Consolidated Statements of Shareholders Equity
 Share Capital
    
    
    Purchase
    
    
    Contributed
    
    
    Convertible
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Warrants
    
    
    Surplus
    
    
    Note
    
    
    Deficit
    
    
    Total(thousands)Balance December 31, 2005
    
    
    220,779
    
    
    $
    291,088
    
    
    $
    5,150
    
    
    $
    3,820
    
    
    $
    
    
    
    $
    (95,291
    )
    
    $
    204,767Net loss and comprehensive 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 8)
    
    
    11,400
    
    
    
    6,493
    
    
    
    18,805
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,298Exercise of options (Note 9)
    
    
    297
    
    
    
    743
    
    
    
    
    
    
    
    (252
    )
    
    
    
    
    
    
    
    
    
    
    491Employee bonuses
    
    
    149
    
    
    
    401
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    401Compensation calculated
for stock option grants (Note 9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,921
    
    
    
    
    
    
    
    
    
    
    
    2,921Balance December 31, 2006
    
    
    241,216
    
    
    
    318,725
    
    
    
    23,955
    
    
    
    6,489
    
    
    
    
    
    
    
    (120,783
    )
    
    
    228,386Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,207
    )
    
    
    (39,207
    )Shares issued for:Exercise of purchase
warrants (Note 8)
    
    
    2,000
    
    
    
    4,313
    
    
    
    (313
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Exercise of options (Note 9)
    
    
    1,231
    
    
    
    431
    
    
    
    
    
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    379Employee bonuses
    
    
    427
    
    
    
    793
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    793Expiry of purchase warrants (Note 8)
    
    
    
    
    
    
    
    
    
    
    (564
    )
    
    
    564
    
    
    
    
    
    
    
    
    
    
    
    Compensation calculated
for stock option grants (Note 9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,936
    
    
    
    
    
    
    
    
    
    
    
    2,936Balance December 31, 2007
    
    
    244,874
    
    
    
    324,262
    
    
    
    23,078
    
    
    
    9,937
    
    
    
    
    
    
    
    (159,990
    )
    
    
    197,287Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,193
    )
    
    
    (34,193
    )Shares issued for:Private placements,
net of share issue costs (Note 8)
    
    
    29,334
    
    
    
    82,451
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,451Exercise of convertible
debt (Note 8)
    
    
    2,291
    
    
    
    4,862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,862Exercise of options (Note 9)
    
    
    2,666
    
    
    
    1,792
    
    
    
    
    
    
    
    (587
    )
    
    
    
    
    
    
    
    
    
    
    1,205Employee bonuses
    
    
    216
    
    
    
    490
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    490Convertible note issued (Note 8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,086
    
    
    
    
    
    
    
    2,086Expiry of purchase warrants (Note 8)
    
    
    
    
    
    
    
    
    
    
    (4,273
    )
    
    
    4,273
    
    
    
    
    
    
    
    
    
    
    
    Compensation calculated
for stock option grants (Note 9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,239
    
    
    
    
    
    
    
    
    
    
    
    3,239Balance December 31, 2008
    
    
    279,381
    
    
    $
    413,857
    
    
    $
    18,805
    
    
    $
    16,862
    
    
    $
    2,086
    
    
    $
    (194,183
    )
    
    $
    257,427
   53




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Consolidated Statements of Cash Flows
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Operating ActivitiesNet loss and comprehensive loss
    
    $
    (34,193
    )
    
    $
    (39,207
    )
    
    $
    (25,492
    )Items not requiring use of cash:Depletion and depreciation
    
    
    31,904
    
    
    
    26,524
    
    
    
    32,550Write-downs and provision for impairment (Note 3 and 4)
    
    
    15,054
    
    
    
    6,130
    
    
    
    5,420Stock based compensation (Note 9)
    
    
    3,554
    
    
    
    3,729
    
    
    
    2,921Unrealized (gain) loss on derivative instruments (Note 12)
    
    
    (11,591
    )
    
    
    8,939
    
    
    
    493Write off of deferred financing costs (Note 13)
    
    
    2,621
    
    
    
    
    
    
    
    Unrealized foreign exchange loss
    
    
    1,762
    
    
    
    
    
    
    
    Provision for uncollectible accounts (Note 12)
    
    
    1,016
    
    
    
    
    
    
    
    Write off of deferred acquisition costs
    
    
    
    
    
    
    
    
    
    
    736Other
    
    
    783
    
    
    
    649
    
    
    
    600Abandonment costs settled (Note 6)
    
    
    
    
    
    
    (792
    )
    
    
    Changes in non-cash working capital items (Note 16)
    
    
    6,143
    
    
    
    (483
    )
    
    
    (2,876
    )17,053
    
    
    
    5,489
    
    
    
    14,352Investing ActivitiesCapital investments
    
    
    (25,606
    )
    
    
    (31,638
    )
    
    
    (17,842
    )Acquisition of oil and gas assets (Note 18)
    
    
    (22,308
    )
    
    
    
    
    
    
    Proceeds from sale of assets (Note 3)
    
    
    100
    
    
    
    1,000
    
    
    
    5,950Recovery of development costs (Note 3)
    
    
    
    
    
    
    9,000
    
    
    
    Advance repayments (payments)
    
    
    200
    
    
    
    500
    
    
    
    (125
    )Merger and acquisition related costs
    
    
    
    
    
    
    
    
    
    
    (736
    )Other
    
    
    (777
    )
    
    
    28
    
    
    
    (116
    )Changes in non-cash working capital items (Note 16)
    
    
    (930
    )
    
    
    (1,177
    )
    
    
    (12,708
    )(49,321
    )
    
    
    (22,287
    )
    
    
    (25,577
    )Financing ActivitiesShares issued on private placements, net of share issue costs
(Note 8)
    
    
    82,451
    
    
    
    
    
    
    
    25,298Proceeds from exercise of options and warrants (Notes 8 and 9)
    
    
    1,205
    
    
    
    4,379
    
    
    
    491Proceeds from debt obligations, net of financing costs (Note 5)
    
    
    5,490
    
    
    
    12,356
    
    
    
    1,280Payments of debt obligations (Note 5)
    
    
    (15,750
    )
    
    
    (2,460
    )
    
    
    (8,689
    )Payments of deferred financing costs (Note 13)
    
    
    (2,621
    )
    
    
    
    
    
    
    Other
    
    
    (50
    )
    
    
    
    
    
    
    Changes in non-cash working capital items (Note 16)
    
    
    26
    
    
    
    
    
    
    
    70,751
    
    
    
    14,275
    
    
    
    18,380Foreign Exchange Loss on Cash and Cash
Equivalents Held in a Foreign Currency
    
    
    (10,574
    )
    
    
    
    
    
    
    Increase (decrease) in Cash and Cash Equivalents, for the year
    
    
    27,909
    
    
    
    (2,523
    )
    
    
    7,155Cash and cash equivalents, beginning of year
    
    
    11,356
    
    
    
    13,879
    
    
    
    6,724Cash and Cash Equivalents, end of year
    
    $
    39,265
    
    
    $
    11,356
    
    
    $
    13,879
   54




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Notes to the Consolidated Financial Statements
(all tabular amounts are expressed in thousands of U.S. Dollars, except share and per share amounts)
 1. NATURE OF OPERATIONS
 Company Ivanhoe Energy RTP TM Process HTL TM Technology HTL TM " EOR E&P
 2. SIGNIFICANT ACCOUNTING POLICIES
 GAAP
   Going Concern and Basis of Presentation
  Principles of Consolidation
     55




---



##### Table of Contents



Foreign Currency Translation
  Cash and Cash Equivalents
  Oil and Gas Properties
 Full Cost Accounting
  Depletion
  Impairment of Proved Oil and Gas Properties
   56




---



##### Table of Contents



Asset Retirement Costs
 TM
   Development Costs
 TM MOU TM
 TM TM CDF TM
 TM
 TM
 Furniture and Equipment
  Intangible Assets
  TM TM TM TM   TM TM
  57




---



##### Table of Contents



Oil and Gas Revenue
   Earnings or Loss Per Share
  Income Taxes
  Stock Based Compensation
    Financial Assets and Liabilities
 Financial assets
   58




---



##### Table of Contents



Financial liabilities
       Derivative Financial Instruments
      59




---



##### Table of Contents



2008 Accounting Changes
 CICA S.1535 S.3862 S.3863
 Impact of New and Pending Canadian GAAP Accounting Standards
 S.3064 S.3062
   Convergence of Canadian GAAP with International Financial Reporting Standards
 IFRS
 IASB
  60




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##### Table of Contents



3. OIL AND GAS PROPERTIES AND DEVELOPMENT COSTS
  As at December 31, 2008Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    TotalOil and Gas Properties:Proved
    
    $
    
    
    
    $
    
    
    
    $
    141,089
    
    
    $
    113,002
    
    
    $
    
    
    
    $
    254,091Unproved
    
    
    81,090
    
    
    
    1,454
    
    
    
    5,233
    
    
    
    3,067
    
    
    
    
    
    
    
    90,84481,090
    
    
    
    1,454
    
    
    
    146,322
    
    
    
    116,069
    
    
    
    
    
    
    
    344,935Accumulated depletion
    
    
    
    
    
    
    
    
    
    
    (81,717
    )
    
    
    (33,197
    )
    
    
    
    
    
    
    (114,914
    )Accumulated provision for impairment
    
    
    
    
    
    
    
    
    
    
    (16,550
    )
    
    
    (50,350
    )
    
    
    
    
    
    
    (66,900
    )81,090
    
    
    
    1,454
    
    
    
    48,055
    
    
    
    32,522
    
    
    
    
    
    
    
    163,121Development Costs:Feasibility studies and
other deferred costs:HTLTM
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    801
    
    
    
    801GTL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    5,054Accumulated
provision for impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,054
    )
    
    
    (5,054
    )Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,770
    
    
    
    8,770Commercial demonstration facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,036
    
    
    
    11,036Accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,713
    )
    
    
    (7,713
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,894
    
    
    
    12,894Furniture and equipment
    
    
    20
    
    
    
    90
    
    
    
    120
    
    
    
    538
    
    
    
    406
    
    
    
    1,174Accumulated depreciation
    
    
    (6
    )
    
    
    
    
    
    
    (80
    )
    
    
    (476
    )
    
    
    (77
    )
    
    
    (639
    )14
    
    
    
    90
    
    
    
    40
    
    
    
    62
    
    
    
    329
    
    
    
    535$
    81,104
    
    
    $
    1,544
    
    
    $
    48,095
    
    
    $
    32,584
    
    
    $
    13,223
    
    
    $
    176,550
 As at December 31, 2007Oil and Gas
    
    
    Business andConventional
    
    
    TechnologyChina
    
    
    U.S.
    
    
    Development
    
    
    TotalOil and Gas Properties:Proved
    
    $
    134,648
    
    
    $
    107,040
    
    
    $
    
    
    
    $
    241,688Unproved
    
    
    3,297
    
    
    
    4,373
    
    
    
    
    
    
    
    7,670137,945
    
    
    
    111,413
    
    
    
    
    
    
    
    249,358Accumulated depletion
    
    
    (58,583
    )
    
    
    (27,091
    )
    
    
    
    
    
    
    (85,674
    )Accumulated provision for
impairment
    
    
    (16,550
    )
    
    
    (50,350
    )
    
    
    
    
    
    
    (66,900
    )62,812
    
    
    
    33,972
    
    
    
    
    
    
    
    96,784Development Costs:Feasibility studies and
other deferred costs:HTLTM
    
    
    
    
    
    
    
    
    
    
    389
    
    
    
    389GTL
    
    
    
    
    
    
    
    
    
    
    5,054
    
    
    
    5,054Feedstock test facility
    
    
    
    
    
    
    
    
    
    
    4,724
    
    
    
    4,724Commercial demonstration facility
    
    
    
    
    
    
    
    
    
    
    9,903
    
    
    
    9,903Accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    (5,159
    )
    
    
    (5,159
    )
    
    
    
    
    
    
    
    14,911
    
    
    
    14,911Furniture and equipment
    
    
    119
    
    
    
    529
    
    
    
    107
    
    
    
    755Accumulated depreciation
    
    
    (77
    )
    
    
    (449
    )
    
    
    (71
    )
    
    
    (597
    )42
    
    
    
    80
    
    
    
    36
    
    
    
    158$
    62,854
    
    
    $
    34,052
    
    
    $
    14,947
    
    
    $
    111,853
  61




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##### Table of Contents



Oil and Gas Properties
     As at December 31, 2008
    
    

As at December 31, 2007
    
    

As at December 31, 2006West Texas
    
    
    Henry
    
    
    West Texas
    
    
    Henry
    
    
    West Texas
    
    
    HenryIntermediate
    
    
    Hub
    
    
    Intermediate
    
    
    Hub
    
    
    Intermediate
    
    
    Hub(per Bbl)
    
    
    (per Mcf)
    
    
    (per Bbl)
    
    
    (per Mcf)
    
    
    (per Bbl)
    
    
    (per Mcf)2007
    
    
    NA
    
    
    
    NA
    
    
    
    NA
    
    
    
    NA
    
    
    $
    62.00
    
    
    $
    7.252008
    
    
    NA
    
    
    
    NA
    
    
    $
    92.00
    
    
    $
    7.50
    
    
    $
    60.00
    
    
    $
    7.502009
    
    $
    57.50
    
    
    $
    7.00
    
    
    $
    88.00
    
    
    $
    8.25
    
    
    $
    58.00
    
    
    $
    7.502010
    
    $
    68.00
    
    
    $
    7.50
    
    
    $
    84.00
    
    
    $
    8.25
    
    
    $
    57.00
    
    
    $
    7.502011
    
    $
    74.00
    
    
    $
    8.00
    
    
    $
    82.00
    
    
    $
    8.25
    
    
    $
    57.00
    
    
    $
    7.502012
    
    $
    85.00
    
    
    $
    8.75
    
    
    $
    82.00
    
    
    $
    8.25
    
    
    $
    57.50
    
    
    $
    7.752013
    
    $
    92.01
    
    
    $
    9.20
    
    
    $
    82.00
    
    
    $
    8.25
    
    
    $
    58.50
    
    
    $
    7.902014
    
    $
    93.85
    
    
    $
    9.38
    
    
    $
    82.00
    
    
    $
    8.45
    
    
    $
    59.75
    
    
    $
    8.052015
    
    $
    95.73
    
    
    $
    9.57
    
    
    $
    82.00
    
    
    $
    8.62
    
    
    $
    61.00
    
    
    $
    8.202016
    
    $
    97.64
    
    
    $
    9.76
    
    
    $
    82.02
    
    
    $
    8.79
    
    
    $
    62.25
    
    
    $
    8.402017
    
    $
    99.59
    
    
    $
    9.96
    
    
    $
    83.66
    
    
    $
    8.96
    
    
    $
    63.50
    
    
    $
    8.552018
    
    $
    101.59
    
    
    $
    10.16
    
    
    
    2% per year
    
    
    $
    9.14
    
    
    
    2% per year
    
    
    
    2% per yearThereafter
    
    
    2% per year
    
    
    
    2% per year
    
    
    
    2% per year
    
    
    
    2% per year
    
    
    
    2% per year
    
    
    
    2% per year
 Development Costs
 TM TM
 INPEX TM TM
 TM
  62




---



##### Table of Contents



FTF
 TM
 Gas-to-Liquids
 GTL Technology GTL Syntroleum
 4. INTANGIBLE ASSETS  TECHNOLOGY
  HTL TM Technology
 Ensyn TM TM TM TM TM
 Syntroleum GTL Master License
  TM
  63




---



##### Table of Contents



5. LONG TERM DEBT
  December 31,
    
    
    December 31,2008
    
    
    2007Variable rate bank note, (5.46% at December 31, 2008), due April 2009
    
    $
    5,200
    
    
    $
    4,500Variable rate bank note (5.33% at December 31, 2008) due September
2010
    
    
    7,000
    
    
    
    10,000Non-interest bearing promissory note, due April 2009
    
    
    416
    
    
    
    2,876Convertible note (5.50% at December 31, 2008) due July 2011
    
    
    32,787
    
    
    
    45,403
    
    
    
    17,376Less:Unamortized discount
    
    
    (4
    )
    
    
    (139
    )Unamortized deferred financing costs
    
    
    (1,932
    )
    
    
    (696
    )Current maturities
    
    
    (5,612
    )
    
    
    (6,729
    )(7,548
    )
    
    
    (7,564
    )$
    37,855
    
    
    $
    9,812
 Bank Loan
 LIBOR
  Promissory Notes
 2008 Note Talisman
  Convertible Note
 Convertible Note
  64




---



##### Table of Contents



Revolving Line of Credit
   2009
    
    $
    5,6162010
    
    
    7,0002011
    
    
    32,787$
    45,403
  6. ASSET RETIREMENT OBLIGATIONS
  As at
    
    
    As atDecember, 31
    
    
    December, 312008
    
    
    2007Carrying balance, beginning of year
    
    $
    2,218
    
    
    $
    1,953Liabilities incurred
    
    
    236
    
    
    
    20Liabilities settled
    
    
    
    
    
    
    (792
    )Accretion expense
    
    
    171
    
    
    
    119Revisions in estimated cash flows
    
    
    1,113
    
    
    
    918Carrying balance, end of period
    
    $
    3,738
    
    
    $
    2,218
  65




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##### Table of Contents



7. COMMITMENTS AND CONTINGENCIES
 Zitong Block Exploration Commitment
 CNPC Mitsubishi
 Phase 1 Zitong Partners" Phase 2
  Long Term Obligation
 TM
 Income Taxes
  Pan-China
   66




---



##### Table of Contents



Other Commitments
    Lease Commitments
   2009
    
    $
    1,1912010
    
    
    1,0092011
    
    
    6802012
    
    
    3312013
    
    
    126$
    3,337
 8. SHARE CAPITAL AND WARRANTS
  Special Warrants Offering
  Offering
   67




---



##### Table of Contents



Convertible Notes
   Purchase Warrants
  Purchase
    
    
    SharesWarrants
    
    
    Issuable(thousands)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
    
    
    
    29,696Purchase warrants exercised
    
    
    (2,000
    )
    
    
    (2,000
    )Purchase warrants expired
    
    
    (1,200
    )
    
    
    (1,200
    )Balance December 31, 2007
    
    
    26,496
    
    
    
    26,496Purchase warrants expired
    
    
    (15,096
    )
    
    
    (15,096
    )Private placements
    
    
    29,334
    
    
    
    29,334Purchase warrants exercised
    
    
    (29,334
    )
    
    
    (29,334
    )Balance December 31, 2008
    
    
    11,400
    
    
    
    11,400
    Number of
    
    
    Purchase WarrantsPrice per
    
    
    Common
    
    
    
    
    
    
    
    
    
    
    Common
    
    
    
    
    
    
    
    
    
    
    Exercise
    
    
    CashYear of
    
    Special
    
    
    Shares
    
    
    
    
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    
    
    
    
    Price per
    
    
    Value onIssue
    
    Warrant
    
    
    Issued
    
    
    Issued
    
    
    Exercisable
    
    
    Issuable
    
    
    Value
    
    
    Expiry Date
    
    
    Share
    
    
    Exercise(thousands)
    
    
    ($U.S. 000)
    
    
    
    
    
    
    
    
    ($U.S. 000)2006
    
    
    U.S.$2.23
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    11,400
    
    
    
    18,805
    
    
    
    May 2011
    
    
    
    Cdn. $2.93
    (1)
    
    
    27,379
 (1)
    
    Each common share purchase warrant originally entitled the holder to purchase one common share
at a price of $2.63 per share until the fifth anniversary date of the closing. In September 2006,
these warrants were listed on the Toronto Stock Exchange and the exercise price was changed to
Cdn.$2.93.   68




---



##### Table of Contents



B-S
 9. STOCK BASED COMPENSATION
    2008
    
    
    2007
    
    
    2006Expected term (in years)
    
    
    4.0
    
    
    
    3.7
    
    
    
    5.5Volatility
    
    
    63.6
    %
    
    
    73.5
    %
    
    
    82.5
    %Dividend Yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Risk-free rate
    
    
    3.1
    %
    
    
    4.1
    %
    
    
    4.4
    %
     69




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##### Table of Contents



December 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006Weighted-
    
    
    
    
    
    
    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
    
    
    12,945
    
    
    $
    2.37
    
    
    
    12,370
    
    
    $
    2.34
    
    
    
    10,278
    
    
    $
    2.21Granted
    
    
    3,832
    
    
    $
    1.79
    
    
    
    3,843
    
    
    $
    1.05
    
    
    
    3,419
    
    
    $
    3.02Exercised
    
    
    (3,067
    )
    
    $
    0.90
    
    
    
    (1,477
    )
    
    $
    0.62
    
    
    
    (297
    )
    
    $
    2.05Expired
    
    
    (580
    )
    
    $
    5.78
    
    
    
    (1,017
    )
    
    $
    3.12
    
    
    
    (448
    )
    
    $
    3.62Forfeited
    
    
    (1,217
    )
    
    $
    3.05
    
    
    
    (774
    )
    
    $
    2.69
    
    
    
    (582
    )
    
    $
    3.22Outstanding at end of year
    
    
    11,913
    
    
    $
    2.32
    
    
    
    12,945
    
    
    $
    2.37
    
    
    
    12,370
    
    
    $
    2.34Options exercisable at end of year
    
    
    5,062
    
    
    $
    2.61
    
    
    
    6,932
    
    
    $
    2.24
    
    
    
    7,720
    
    
    $
    1.92
   Stock Options Outstanding
    
    
    Stock Options ExercisableWeighted-Average
    
    
    
    
    
    
    
    
    
    
    Weighted-AverageRange of
    
    Number
    
    
    Remaining
    
    
    Weighted-Average
    
    
    Number
    
    
    Remaining
    
    
    Weighted-AverageExercise Prices
    
    Outstanding
    
    
    Contractual Life
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Contractual Life
    
    
    Exercise Price(Cdn.$)
    
    (thousands)
    
    
    (Years)
    
    
    (Cdn.$)
    
    
    (thousands)
    
    
    (Years)
    
    
    (Cdn.$)$1.52 to $2.25
    
    
    6,097
    
    
    
    3.8
    
    
    $
    1.80
    
    
    
    1,432
    
    
    
    3.6
    
    
    $
    1.83$2.29 to $3.44
    
    
    5,504
    
    
    
    2.3
    
    
    $
    2.84
    
    
    
    3,432
    
    
    
    2.0
    
    
    $
    2.87$3.53 to $3.62
    
    
    312
    
    
    
    1.9
    
    
    $
    3.55
    
    
    
    198
    
    
    
    1.8
    
    
    $
    3.56$1.52 to $3.62
    
    
    11,913
    
    
    
    3.1
    
    
    $
    2.32
    
    
    
    5,062
    
    
    
    2.4
    
    
    $
    2.61
  Weighted-Number
    
    
    Averageof Stock
    
    
    Grant DateOptions
    
    
    Fair Value(thousands)
    
    
    (Cdn.$)Outstanding at December 31, 2007
    
    
    6,013
    
    
    $
    1.12Granted
    
    
    3,831
    
    
    $
    0.90Vested
    
    
    (2,692
    )
    
    $
    0.68Cancelled/forfeited
    
    
    (301
    )
    
    $
    0.03Outstanding at December 31, 2008
    
    
    6,851
    
    
    $
    0.98Unvested options
outstanding at
December 31, 2008 by type:Based on fulfulling service conditions
    
    
    5,412Based on fulfulling performance conditions
    
    
    1,4396,851
   70




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##### Table of Contents



10. RETIREMENT PLAN
 4 01(k) Plan
 11. SEGMENT INFORMATION
  Oil and Gas
 Integrated
 TM
 Conventional
  Business and Technology Development
 TM
 TM
 Corporate
 ,
  71




---



##### Table of Contents



Year Ended December 31, 2008Oil and Gas
    
    
    Business andIntegrated
    
    
    Conventional
    
    
    TechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil and gas revenue
    
    $
    
    
    
    $
    
    
    
    $
    48,370
    
    
    $
    18,120
    
    
    $
    
    
    
    $
    
    
    
    $
    66,490Gain on derivative instruments
    
    
    
    
    
    
    
    
    
    
    1,688
    
    
    
    278
    
    
    
    
    
    
    
    
    
    
    
    1,966Interest income
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    98
    
    
    
    
    
    
    
    562
    
    
    
    710
    
    
    
    
    
    
    
    50,108
    
    
    
    18,496
    
    
    
    
    
    
    
    562
    
    
    
    69,166ExpensesOperating costs
    
    
    
    
    
    
    
    
    
    
    21,515
    
    
    
    5,137
    
    
    
    
    
    
    
    
    
    
    
    26,652General and administrative
    
    
    1,653
    
    
    
    658
    
    
    
    2,245
    
    
    
    2,411
    
    
    
    
    
    
    
    11,223
    
    
    
    18,190Business and technology development
    
    
    189
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,264
    
    
    
    
    
    
    
    6,453Depletion and depreciation
    
    
    3
    
    
    
    
    
    
    
    23,135
    
    
    
    6,143
    
    
    
    2,618
    
    
    
    5
    
    
    
    31,904Interest expense and financing costs
    
    
    
    
    
    
    
    
    
    
    821
    
    
    
    520
    
    
    
    76
    
    
    
    412
    
    
    
    1,829Provion for impairment of GTL
intangible assets and development costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,054
    
    
    
    
    
    
    
    15,054Write off of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    2,621
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,6211,845
    
    
    
    658
    
    
    
    50,337
    
    
    
    14,211
    
    
    
    24,012
    
    
    
    11,640
    
    
    
    102,703Income (Loss) before Income Taxes
    
    
    (1,845
    )
    
    
    (658
    )
    
    
    (229
    )
    
    
    4,285
    
    
    
    (24,012
    )
    
    
    (11,078
    )
    
    
    (33,537
    )Provision for income taxesCurrent
    
    
    
    
    
    
    
    
    
    
    (650
    )
    
    
    (4
    )
    
    
    (2
    )
    
    
    
    
    
    
    (656
    )Net Income (Loss) and Comprehensive
Income (Loss)
    
    $
    (1,845
    )
    
    $
    (658
    )
    
    $
    (879
    )
    
    $
    4,281
    
    
    $
    (24,014
    )
    
    $
    (11,078
    )
    
    $
    (34,193
    )Capital Investments
    
    $
    6,484
    
    
    $
    1,369
    
    
    $
    8,378
    
    
    $
    4,542
    
    
    $
    4,833
    
    
    $
    
    
    
    $
    25,606Identifiable Assets:As at December 31, 2008
    
    $
    81,126
    
    
    $
    1,766
    
    
    $
    64,901
    
    
    $
    37,480
    
    
    $
    105,587
    
    
    $
    26,415
    
    
    $
    317,275
  72




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##### Table of Contents



Year Ended December 31, 2007Oil and Gas
    
    
    Business andConventional
    
    
    TechnologyChina
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil and gas revenue
    
    $
    31,365
    
    
    $
    12,270
    
    
    $
    
    
    
    $
    
    
    
    $
    43,635Loss on derivative instruments
    
    
    (4,993
    )
    
    
    (5,594
    )
    
    
    
    
    
    
    
    
    
    
    (10,587
    )Interest income
    
    
    58
    
    
    
    152
    
    
    
    
    
    
    
    259
    
    
    
    46926,430
    
    
    
    6,828
    
    
    
    
    
    
    
    259
    
    
    
    33,517ExpensesOperating costs
    
    
    13,000
    
    
    
    4,319
    
    
    
    
    
    
    
    
    
    
    
    17,319General and administrative
    
    
    2,042
    
    
    
    2,018
    
    
    
    
    
    
    
    8,016
    
    
    
    12,076Business and technology development
    
    
    
    
    
    
    
    
    
    
    9,625
    
    
    
    
    
    
    
    9,625Depletion and depreciation
    
    
    19,222
    
    
    
    5,884
    
    
    
    1,412
    
    
    
    6
    
    
    
    26,524Interest expense and financing costs
    
    
    281
    
    
    
    427
    
    
    
    29
    
    
    
    313
    
    
    
    1,050Provision for impairment of
oil and gas properties
    
    
    6,130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,13040,675
    
    
    
    12,648
    
    
    
    11,066
    
    
    
    8,335
    
    
    
    72,724Net Loss and Comprehensive
Loss
    
    $
    (14,245
    )
    
    $
    (5,820
    )
    
    $
    (11,066
    )
    
    $
    (8,076
    )
    
    $
    (39,207
    )Capital Investments
    
    $
    23,488
    
    
    $
    3,052
    
    
    $
    5,098
    
    
    $
    
    
    
    $
    31,638Identifiable Assets:As at December 31, 2007
    
    $
    73,298
    
    
    $
    40,726
    
    
    $
    117,529
    
    
    $
    5,363
    
    
    $
    236,916
 Year Ended December 31, 2006Oil and Gas
    
    
    Business andConventional
    
    
    TechnologyChina
    
    
    U.S.
    
    
    Development
    
    
    Corporate
    
    
    TotalRevenueOil and gas revenue
    
    $
    35,683
    
    
    $
    12,065
    
    
    $
    
    
    
    $
    
    
    
    $
    47,748Loss on derivative instruments
    
    
    
    
    
    
    (424
    )
    
    
    
    
    
    
    
    
    
    
    (424
    )Interest income
    
    
    63
    
    
    
    139
    
    
    
    
    
    
    
    574
    
    
    
    77635,746
    
    
    
    11,780
    
    
    
    
    
    
    
    574
    
    
    
    48,100ExpensesOperating costs
    
    
    11,834
    
    
    
    4,299
    
    
    
    
    
    
    
    
    
    
    
    16,133General and administrative
    
    
    1,337
    
    
    
    1,676
    
    
    
    
    
    
    
    7,167
    
    
    
    10,180Business and technology development
    
    
    
    
    
    
    
    
    
    
    7,610
    
    
    
    
    
    
    
    7,610Depletion and depreciation
    
    
    23,345
    
    
    
    5,378
    
    
    
    3,822
    
    
    
    5
    
    
    
    32,550Interest expense and financing costs
    
    
    156
    
    
    
    290
    
    
    
    10
    
    
    
    507
    
    
    
    963Write off of deferred acquisition costs
    
    
    736
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    736Provision for impairment of
oil and gas properties
    
    
    5,420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,42042,828
    
    
    
    11,643
    
    
    
    11,442
    
    
    
    7,679
    
    
    
    73,592Net Income (Loss) and Comprehensive
Income (Loss)
    
    $
    (7,082
    )
    
    $
    137
    
    
    $
    (11,442
    )
    
    $
    (7,105
    )
    
    $
    (25,492
    )Capital Investments
    
    $
    9,086
    
    
    $
    5,550
    
    
    $
    3,206
    
    
    $
    
    
    
    $
    17,842
  73




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##### Table of Contents



12. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS
  As at December 31, 2008FinancialAvailable-for-
    
    
    
    
    
    
    liabilitiesLoans and
    
    
    sale financial
    
    
    Held-for-
    
    
    measured at
    
    
    Total carryingreceivables
    
    
    assets
    
    
    trading
    
    
    amortized cost
    
    
    amountFinancial Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    39,265
    
    
    $
    
    
    
    $
    39,265Accounts receivable
    
    
    4,870
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,870Derivative instruments
    
    
    
    
    
    
    
    
    
    
    2,159
    
    
    
    
    
    
    
    2,159Financial Liabilities:Accounts payable and
accrued liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,093
    )
    
    
    (10,093
    )Long term obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,900
    )
    
    
    (1,900
    )Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,467
    )
    
    
    (43,467
    )$
    4,870
    
    
    $
    
    
    
    $
    41,424
    
    
    $
    (55,460
    )
    
    $
    (9,166
    )
 As at December 31, 2007FinancialAvailable-for-
    
    
    
    
    
    
    liabilitiesLoans and
    
    
    sale financial
    
    
    Held-for-
    
    
    measured at
    
    
    Total carryingreceivables
    
    
    assets
    
    
    trading
    
    
    amortized cost
    
    
    amountFinancial Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    11,356
    
    
    $
    
    
    
    $
    11,356Accounts receivable
    
    
    9,376
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,376Advance
    
    
    825
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    825Financial Liabilities:Accounts payable and
accrued liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,538
    )
    
    
    (9,538
    )Derivative instruments
    
    
    
    
    
    
    
    
    
    
    (9,432
    )
    
    
    
    
    
    
    (9,432
    )Long term obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,900
    )
    
    
    (1,900
    )Long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,541
    )
    
    
    (16,541
    )$
    10,201
    
    
    $
    
    
    
    $
    1,924
    
    
    $
    (27,979
    )
    
    $
    (15,854
    )
 Financial Risk Factors
  Market Risk
  Commodity Price Risks
   74




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##### Table of Contents



Year Ended December 31,2008
    
    
    2007
    
    
    2006Realized gains (losses) on derivative transactions
    
    $
    (9,625
    )
    
    $
    (1,648
    )
    
    $
    69Unrealized gains (losses) on derivative transactions
    
    
    11,591
    
    
    
    (8,939
    )
    
    
    (493
    )$
    1,966
    
    
    $
    (10,587
    )
    
    $
    (424
    )
   Foreign Currency Exchange Rate Risk
  Interest Rate Risk
  Credit Risk
 TM
  75




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##### Table of Contents



Accounts Receivable as
    
    
    Oil and Gas Revenue for the Yearat December 31,
    
    
    Ended December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006U.S. CustomersA
    
    $
    436
    
    
    $
    1,138
    
    
    $
    16,679
    
    
    $
    10,903
    
    
    $
    10,351B
    
    
    50
    
    
    
    207
    
    
    
    1,011
    
    
    
    1,011
    
    
    
    1,094C
    
    
    57
    
    
    
    72
    
    
    
    267
    
    
    
    271
    
    
    
    277D
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    74
    
    
    
    236All others
    
    
    18
    
    
    
    27
    
    
    
    72
    
    
    
    11
    
    
    
    107561
    
    
    
    1,444
    
    
    
    18,121
    
    
    
    12,270
    
    
    
    12,065China CustomerA
    
    
    3,057
    
    
    
    6,564
    
    
    
    48,369
    
    
    
    31,365
    
    
    
    35,6833,618
    
    
    
    8,008
    
    
    
    66,490
    
    
    
    43,635
    
    
    
    47,748Receivables from partners
    
    
    613
    
    
    
    815
    
    
    
    
    
    
    
    
    
    
    
    Other receivables
    
    
    639
    
    
    
    553
    
    
    
    
    
    
    
    
    
    
    
    $
    4,870
    
    
    $
    9,376
    
    
    $
    66,490
    
    
    $
    43,635
    
    
    $
    47,748
  December 31,
    
    
    December 31,2008
    
    
    2007Accounts Receivable:Neither impaired nor past due
    
    $
    4,509
    
    
    $
    8,259Impaired (net of valuation allowance)
    
    
    
    
    
    
    Not impaired and past due in the following periods:within 30 days
    
    
    108
    
    
    
    34731 to 60 days
    
    
    46
    
    
    
    61 to 90 days
    
    
    72
    
    
    
    4over 90 days
    
    
    135
    
    
    
    7664,870
    
    
    
    9,376AdvanceNot impaired and past due over 90 days
    
    
    
    
    
    
    825$
    4,870
    
    
    $
    10,201
  Liquidity Risk
   76




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##### Table of Contents



As at December 31, 2008
    
    
    As at December 31, 2007Contractual Maturity
    
    
    Contractual Maturity(Nominal Cash Flows)
    
    
    (Nominal Cash Flows)Less than
    
    
    1 to 2
    
    
    2 to 5
    
    
    Over 5
    
    
    Less than
    
    
    1 to 2
    
    
    2 to 5
    
    
    Over 51 year
    
    
    years
    
    
    years
    
    
    years
    
    
    1 year
    
    
    years
    
    
    years
    
    
    yearsDerivative financial liabilities:Costless Collars  oil price commodity
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    7,156
    
    
    $
    2,276
    
    
    $
    
    
    
    $
    Non derivative financial liabilities:Trade accounts payable
    
    $
    4,835
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,897
    
    
    $
    
    
    
    $
    
    
    
    $
    Accruals
    
    $
    5,258
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,641
    
    
    $
    
    
    
    $
    
    
    
    $
    Long term debt and interest
    
    $
    8,777
    
    
    $
    9,432
    
    
    $
    33,495
    
    
    $
    
    
    
    $
    8,240
    
    
    $
    1,541
    
    
    $
    10,277
    
    
    $
    
 13. CAPITAL MANAGEMENT
  Note 5.
     77




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##### Table of Contents



14. INCOME TAXES
  Year ended December 31,2008
    
    
    2007
    
    
    2006Tax benefit computed at the combined Canadian federal and
provincial statutory income tax rates
    
    $
    (9,893
    )
    
    $
    (12,593
    )
    
    $
    (8,188
    )Foreign net losses affected at lower income tax rates
    
    
    5,084
    
    
    
    905
    
    
    
    113Effect of change in foreign exchange rates
    
    
    3,006
    
    
    
    (2,879
    )
    
    
    (14
    )Expiry of tax loss carry-forwards
    
    
    2,875
    
    
    
    2,440
    
    
    
    1,583Stock-based compensation not deductible
    
    
    905
    
    
    
    1,001
    
    
    
    1,031Financing costs not deductible
    
    
    695
    
    
    
    
    
    
    
    Net currency exchange losses not deductible
    
    
    402
    
    
    
    
    
    
    
    Change in prior year estimate of tax loss carry-forwards
    
    
    (430
    )
    
    
    (483
    )
    
    
    503Realized derivative (gains)/losses not taxable/deductible
    
    
    (422
    )
    
    
    1,248
    
    
    
    Effect of change in effective income tax rates on future tax assets
    
    
    (331
    )
    
    
    6,109
    
    
    
    870Other permanent differences
    
    
    (58
    )
    
    
    778
    
    
    
    95Tax credit carry-forward
    
    
    
    
    
    
    607
    
    
    
    (428
    )1,833
    
    
    
    (2,867
    )
    
    
    (4,435
    )Valuation allowance
    
    
    (1,833
    )
    
    
    2,867
    
    
    
    4,435$
    
    
    
    $
    
    
    
    $
    
  As at December 31,2008
    
    
    2007Future Income Tax
    
    
    Future Income TaxAssets
    
    
    Liabilities
    
    
    Assets
    
    
    LiabilitiesOil and gas properties and investments
    
    $
    
    
    
    $
    (1,972
    )
    
    $
    
    
    
    $
    (3,330
    )Intangibles
    
    
    
    
    
    
    (37,089
    )
    
    
    
    
    
    
    (36,976
    )Derivative contracts
    
    
    
    
    
    
    (292
    )
    
    
    1,989
    
    
    
    Tax loss carry-forwards
    
    
    60,355
    
    
    
    
    
    
    
    61,152
    
    
    
    Tax credit carry-forward
    
    
    1,278
    
    
    
    
    
    
    
    1,278
    
    
    
    Valuation allowance
    
    
    (22,280
    )
    
    
    
    
    
    
    (24,113
    )
    
    
    $
    39,353
    
    
    $
    (39,353
    )
    
    $
    40,306
    
    
    $
    (40,306
    )
    15. NET LOSS PER SHARE
  Year
ended December 31,2008
    
    
    2007
    
    
    2006(thousands of shares)Stock options
    
    
    1,374
    
    
    
    2,433
    
    
    
    3,292Richfirst conversion rights
    
    
    
    
    
    
    
    
    
    
    1,104Purchase warrants
    
    
    
    
    
    
    
    
    
    
    121Convertible debt
    
    
    6,943
    
    
    
    
    
    
    
    8,317
    
    
    
    2,433
    
    
    
    4,517
  78




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##### Table of Contents



Year
ended December 31,2008
    
    
    2007
    
    
    2006(thousands of shares)Stock options
    
    
    9,944
    
    
    
    8,616
    
    
    
    7,022Purchase warrants
    
    
    16,399
    
    
    
    28,898
    
    
    
    25,18426,343
    
    
    
    37,514
    
    
    
    32,206
 16. SUPPLEMENTAL CASH FLOW INFORMATION
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Cash paid during the period forIncome taxes
    
    $
    6
    
    
    $
    6
    
    
    $
    5Interest
    
    $
    1,431
    
    
    $
    479
    
    
    $
    430Investing and Financing activities, non-cashAcquisition of oil and gas assetsDebt issued
    
    $
    52,052
    
    
    $
    
    
    
    $
    6,547Shares issued
    
    
    
    
    
    
    
    
    
    
    20,000Receivable applied to acquisition
    
    
    
    
    
    
    
    
    
    
    1,746$
    52,052
    
    
    $
    
    
    
    $
    28,293Conversion of debt to sharesExtinguishment of debt
    
    $
    4,737
    
    
    $
    
    
    
    $
    Extinguishment of interest
    
    
    125
    
    
    
    
    
    
    
    $
    4,862
    
    
    $
    
    
    
    $
    Shares issued for bonuses
    
    $
    490
    
    
    $
    793
    
    
    $
    401Stock based compensation capitalized
    
    $
    175
    
    
    $
    
    
    
    $
    Changes in non-cash working capital itemsOperating ActivitiesAccounts receivable
    
    $
    4,159
    
    
    $
    (1,734
    )
    
    $
    (1,375
    )Prepaid and other current assets
    
    
    (136
    )
    
    
    85
    
    
    
    (434
    )Accounts payable and accrued liabilities
    
    
    1,470
    
    
    
    1,166
    
    
    
    (1,067
    )Income tax payable
    
    
    650
    
    
    
    
    
    
    
    6,143
    
    
    
    (483
    )
    
    
    (2,876
    )Investing ActivitiesAccounts receivable
    
    
    (44
    )
    
    
    (207
    )
    
    
    2,188Prepaid and other current assets
    
    
    (70
    )
    
    
    86
    
    
    
    (1
    )Accounts payable and accrued liabilities
    
    
    (816
    )
    
    
    (1,056
    )
    
    
    (14,895
    )(930
    )
    
    
    (1,177
    )
    
    
    (12,708
    )Financing ActivitiesAccounts payable and accrued liabilities
    
    
    26
    
    
    
    
    
    
    
    $
    5,239
    
    
    $
    (1,660
    )
    
    $
    (15,584
    )
  17. RELATED PARTY TRANSACTIONS
   79




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##### Table of Contents



18. ACQUISTION AND PROJECT RELATED AGREEMENTS
 Canada
 Talisman
  Back-in Right
 (a)
    
    100% of the Companys acquisition cost and certain expenses in respect of the
relevant lease if the Back-in Right is exercised on or before July 11, 2009;
 (b)
    
    150% of the Companys acquisition cost and certain expenses in respect of the
relevant lease if the Back-in Right is exercised after July 11, 2009 but on or before
July 11, 2010; or
 (c)
    
    200% of the Companys acquisition cost and certain expenses in respect of the
relevant lease if the Back-in Right is exercised after July 11, 2010 but on or before
July 11, 2011.
  Ecuador
 IE Ecuador Petroecuador Petroproduccion TM IE Latin America
  China
 Richfirst Sunwing"
  80




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##### Table of Contents



19.
    ADDITIONAL DISCLOSURES REQUIRED UNDER U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  Consolidated Balance Sheets
  As at December 31, 2008
    
    
    As at December 31, 2007Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.
    
    
    Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAP
    
    
    GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAPAssetsCurrent Assets:Cash and cash equivalents
    
    $
    39,265
    
    
    
    
    
    
    
    
    
    
    $
    39,265
    
    
    $
    11,356
    
    
    
    
    
    
    
    
    
    
    $
    11,356Accounts receivable
    
    
    4,870
    
    
    
    
    
    
    
    
    
    
    
    4,870
    
    
    
    9,376
    
    
    
    
    
    
    
    
    
    
    
    9,376Advance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    825
    
    
    
    
    
    
    
    
    
    
    
    825Prepaid and other current assets
    
    
    1,658
    
    
    
    
    
    
    
    
    
    
    
    1,658
    
    
    
    602
    
    
    
    96
    
    
    (xi)
    
    
    698Derivative instruments
    
    
    2,159
    
    
    
    
    
    
    
    
    
    
    
    2,159
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Current Assets
    
    
    47,952
    
    
    
    
    
    
    
    
    
    
    
    47,952
    
    
    
    22,159
    
    
    
    96
    
    
    
    
    
    
    
    22,255Oil and gas properties
and development costs, net
    
    
    176,550
    
    
    
    1,358
    
    
    (iv)
    
    
    122,071
    
    
    
    111,853
    
    
    
    1,358
    
    
    (iv)
    
    
    90,897(67,850
    )
    
    
    (v)
    
    
    
    
    
    
    
    
    
    
    
    (25,990
    )
    
    
    (v)13,031
    
    
    (vi)
    
    
    
    
    
    
    
    
    
    
    9,334
    
    
    (vi)(1,018
    )
    
    (vii)
    
    
    
    
    
    
    
    
    
    
    (5,658
    )
    
    (vii)Intangible assets  technology
    
    
    92,153
    
    
    
    
    
    
    
    
    
    
    
    92,153
    
    
    
    102,153
    
    
    
    
    
    
    
    
    
    
    
    102,153Long term assets
    
    
    620
    
    
    
    451
    
    
    (xi)
    
    
    1,071
    
    
    
    751
    
    
    
    600
    
    
    (xi)
    
    
    1,351Total Assets
    
    $
    317,275
    
    
    $
    (54,028
    )
    
    
    
    
    
    $
    263,247
    
    
    $
    236,916
    
    
    $
    (20,260
    )
    
    
    
    
    
    $
    216,656Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable and accrued
liabilities
    
    $
    10,093
    
    
    
    
    
    
    
    
    
    
    $
    10,093
    
    
    $
    9,538
    
    
    $
    
    
    
    
    
    
    
    $
    9,538Income tax payable
    
    
    650
    
    
    
    
    
    
    
    
    
    
    
    650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Debt  current portion
    
    
    5,612
    
    
    
    
    
    
    
    
    
    
    
    5,612
    
    
    
    6,729
    
    
    
    96
    
    
    (xi)
    
    
    6,825Derivative instruments
    
    
    
    
    
    
    1,121
    
    
    (iii)
    
    
    1,121
    
    
    
    9,432
    
    
    
    5,786
    
    
    (iii)
    
    
    15,218Total Current Liabilities
    
    
    16,355
    
    
    
    1,121
    
    
    
    
    
    
    
    17,476
    
    
    
    25,699
    
    
    
    5,882
    
    
    
    
    
    
    
    31,581Long term debt
    
    
    37,855
    
    
    
    451
    
    
    (xi)
    
    
    40,392
    
    
    
    9,812
    
    
    
    600
    
    
    (xi)
    
    
    10,4122,086
    
    
    (viii)Asset retirement obligations
    
    
    3,738
    
    
    
    
    
    
    
    
    
    
    
    3,738
    
    
    
    2,218
    
    
    
    
    
    
    
    
    
    
    
    2,218Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    1,900Total Liabilities
    
    
    59,848
    
    
    
    3,658
    
    
    
    
    
    
    
    63,506
    
    
    
    39,629
    
    
    
    6,482
    
    
    
    
    
    
    
    46,111Shareholders Equity:Share capital
    
    
    413,857
    
    
    
    74,455
    
    
    
    (i)
    
    
    
    502,372
    
    
    
    324,262
    
    
    
    74,455
    
    
    
    (i)
    
    
    
    412,879(498
    )
    
    (ii)
    
    
    
    
    
    
    
    
    
    
    (396
    )
    
    (ii)1,358
    
    
    (iv)
    
    
    
    
    
    
    
    
    
    
    1,358
    
    
    (iv)13,200
    
    
    (iii)
    
    
    
    
    
    
    
    
    
    
    13,200
    
    
    (iii)Purchase warrants
    
    
    18,805
    
    
    
    (18,805
    )
    
    (iii)
    
    
    
    
    
    
    23,078
    
    
    
    (21,218
    )
    
    (iii)
    
    
    1,860Contributed surplus
    
    
    16,862
    
    
    
    (3,250
    )
    
    (ii)
    
    
    10,665
    
    
    
    9,937
    
    
    
    (3,352
    )
    
    (ii)
    
    
    6,051(2,947
    )
    
    (iii)
    
    
    
    
    
    
    
    
    
    
    (534
    )
    
    (iii)Convertible note
    
    
    2,086
    
    
    
    (2,086
    )
    
    (viii)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated deficit
    
    
    (194,183
    )
    
    
    (119,113
    )
    
    
    
    
    
    
    (313,296
    )
    
    
    (159,990
    )
    
    
    (90,255
    )
    
    
    
    
    
    
    (250,245
    )Total Shareholders Equity
    
    
    257,427
    
    
    
    (57,686
    )
    
    
    
    
    
    
    199,741
    
    
    
    197,287
    
    
    
    (26,742
    )
    
    
    
    
    
    
    170,545Total Liabilities and Shareholders
Equity
    
    $
    317,275
    
    
    $
    (54,028
    )
    
    
    
    
    
    $
    263,247
    
    
    $
    236,916
    
    
    $
    (20,260
    )
    
    
    
    
    
    $
    216,656
  81




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##### Table of Contents



Shareholders Equity
 
   FASB SFAS SFAS No.
123(R)
 SFAS No. 133
 Oil and Gas Properties and Development Costs
   82




---



##### Table of Contents



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
    )2007
    
    
    
    
    
    
    
    
    
    
    2008
    
    
    20,300
    
    
    
    
    
    
    
    (20,300
    )79,700
    
    
    
    50,350
    
    
    
    (29,350
    )China PropertiesPrior to 2004
    
    
    10,000
    
    
    
    
    
    
    
    (10,000
    )2004
    
    
    
    
    
    
    
    
    
    
    2005
    
    
    1,700
    
    
    
    5,000
    
    
    
    3,3002006
    
    
    15,940
    
    
    
    5,420
    
    
    
    (10,520
    )2007
    
    
    5,850
    
    
    
    6,130
    
    
    
    2802008
    
    
    21,560
    
    
    
    
    
    
    
    (21,560
    )55,050
    
    
    
    16,550
    
    
    
    (38,500
    )$
    134,750
    
    
    $
    66,900
    
    
    $
    (67,850
    )
  TM TM TM
   83




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##### Table of Contents



Deferred Financing Costs
  Consolidated Statements of Operations
  Year Ended December 31, 2008Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAPRevenueOil and gas revenue
    
    $
    66,490
    
    
    
    
    
    
    
    
    
    
    $
    66,490Gain on derivative instruments
    
    
    1,966
    
    
    
    4,665
    
    

    (iii)
    
    
    6,631Interest income
    
    
    710
    
    
    
    
    
    
    
    
    
    
    
    710Total Revenue
    
    
    69,166
    
    
    
    4,665
    
    
    
    
    
    
    
    73,831ExpensesOperating costs
    
    
    26,652
    
    
    
    
    
    
    
    
    
    
    
    26,652General and administrative
    
    
    18,190
    
    
    
    
    
    
    
    
    
    
    
    18,190Business and technology development
    
    
    6,453
    
    
    
    
    
    
    
    
    
    
    
    6,453Depletion and depreciation
    
    
    31,904
    
    
    
    (3,697
    )
    

    (ix)
    
    
    28,207Interest expense and financing costs
    
    
    1,829
    
    
    
    
    
    
    
    
    
    
    
    1,829Provision for impairment of HTLTM and GTL
intangible assets and development costs
    
    
    15,054
    
    
    
    (4,640
    )
    

    (x)
    
    
    
    10,414Write off of deferred financing costs
    
    
    2,621
    
    
    
    
    
    
    
    
    
    
    
    2,621Provision for impairment of oil and gas properties
    
    
    
    
    
    
    41,860
    
    

    (ix)
    
    
    41,860Total Expenses
    
    
    102,703
    
    
    
    33,523
    
    
    
    
    
    
    
    136,226Loss before Income Taxes
    
    
    (33,537
    )
    
    
    (28,858
    )
    
    
    
    
    
    
    (62,395
    )Current provision for income taxes
    
    
    (656
    )
    
    
    
    
    
    
    
    
    
    
    (656
    )Net Loss and Comprehensive Loss
    
    
    (34,193
    )
    
    
    (28,858
    )
    
    
    
    
    
    
    (63,051
    )Accumulated Deficit, beginning of year
    
    
    (159,990
    )
    
    
    (90,255
    )
    
    
    
    
    
    
    (250,245
    )Accumulated Deficit, end of year
    
    $
    (194,183
    )
    
    $
    (119,113
    )
    
    
    
    
    
    $
    (313,296
    )Net Loss per share  Basic and Diluted
    
    $
    (0.13
    )
    
    $
    (0.11
    )
    
    
    
    
    
    $
    (0.24
    )Weighted Average Number of Shares (in thousands)Basic and Diluted
    
    
    258,815
    
    
    
    
    
    
    
    
    
    
    
    258,815
  84




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##### Table of Contents



Year Ended December 31, 2007Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAPRevenueOil and gas revenue
    
    $
    43,635
    
    
    $
    
    
    
    
    
    
    
    $
    43,635Loss on derivative instruments
    
    
    (10,587
    )
    
    
    592
    
    

(iii)
    
    
    (9,995
    )Interest income
    
    
    469
    
    
    
    
    
    
    
    
    
    
    
    469Total Revenue
    
    
    33,517
    
    
    
    592
    
    
    
    
    
    
    
    34,109ExpensesOperating costs
    
    
    17,319
    
    
    
    
    
    
    
    
    
    
    
    17,319General and administrative
    
    
    12,076
    
    
    
    
    
    
    
    
    
    
    
    12,076Business and technology development
    
    
    9,625
    
    
    
    
    
    
    
    
    
    
    
    9,625Depletion and depreciation
    
    
    26,524
    
    
    
    (4,932
    )
    
    (ix)
    
    
    21,592Interest expense and financing costs
    
    
    1,050
    
    
    
    
    
    
    
    
    
    
    
    1,050Provision for impairment of HTLTM and GTL
intangible assets and development costs
    
    
    
    
    
    
    (6,011
    )
    

    (x)
    
    
    
    (6,011
    )Provision for impairment of oil and gas properties
    
    
    6,130
    
    
    
    (280
    )
    
    (ix)
    
    
    5,850Total Expenses
    
    
    72,724
    
    
    
    (11,223
    )
    
    
    
    
    
    
    61,501Net Loss and Comprehensive Loss
    
    
    (39,207
    )
    
    
    11,815
    
    
    
    
    
    
    
    (27,392
    )Accumulated Deficit, beginning of year
    
    
    (120,783
    )
    
    
    (102,070
    )
    
    
    
    
    
    
    (222,853
    )Accumulated Deficit, end of year
    
    $
    (159,990
    )
    
    $
    (90,255
    )
    
    
    
    
    
    $
    (250,245
    )Net Loss per share  Basic and Diluted
    
    $
    (0.16
    )
    
    $
    0.05
    
    
    
    
    
    
    $
    (0.11
    )Weighted Average Number of Shares (in thousands)Basic and Diluted
    
    
    242,362
    
    
    
    
    
    
    
    
    
    
    
    242,362
 Year Ended December 31, 2006Canadian
    
    
    Increase
    
    
    
    
    
    
    U.S.GAAP
    
    
    (Decrease)
    
    
    Notes
    
    
    GAAPRevenueOil and gas revenue
    
    $
    47,748
    
    
    $
    
    
    
    
    
    
    
    $
    47,748Loss on derivative instruments
    
    
    (424
    )
    
    
    (691
    )
    
   (iii)
    
    
    (1,115
    )Interest income
    
    
    776
    
    
    
    
    
    
    
    
    
    
    
    776Total Revenue
    
    
    48,100
    
    
    
    (691
    )
    
    
    
    
    
    
    47,409ExpensesOperating costs
    
    
    16,133
    
    
    
    
    
    
    
    
    
    
    
    16,133General and administrative
    
    
    10,180
    
    
    
    
    
    
    
    
    
    
    
    10,180Business and technology development
    
    
    7,610
    
    
    
    
    
    
    
    
    
    
    
    7,610Depletion and depreciation
    
    
    32,550
    
    
    
    (2,840
    )
    
    (ix)
    
    
    29,710Interest expense and financing costs
    
    
    963
    
    
    
    
    
    
    
    
    
    
    
    963Provision for impairment of HTLTM and GTL
intangible assets and development costs
    
    
    
    
    
    
    958
    
    

    (x)
    
    
    
    958Provision for impairment of oil and gas properties
    
    
    5,420
    
    
    
    18,120
    
    
    (ix)
    
    
    23,540Write off of deferred acquisition costs
    
    
    736
    
    
    
    
    
    
    
    
    
    
    
    736Total Expenses
    
    
    73,592
    
    
    
    16,238
    
    
    
    
    
    
    
    89,830Net Loss and Comprehensive Loss
    
    
    (25,492
    )
    
    
    (16,929
    )
    
    
    
    
    
    
    (42,421
    )Accumulated Deficit, beginning of year
    
    
    (95,291
    )
    
    
    (85,141
    )
    
    
    
    
    
    
    (180,432
    )Accumulated Deficit, end of year
    
    $
    (120,783
    )
    
    $
    (102,070
    )
    
    
    
    
    
    $
    (222,853
    )Net Loss per share  Basic and Diluted
    
    $
    (0.11
    )
    
    $
    (0.07
    )
    
    
    
    
    
    $
    (0.18
    )Weighted Average Number of Shares (in thousands)Basic and Diluted
    
    
    235,640
    
    
    
    
    
    
    
    
    
    
    
    235,640
  85




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##### Table of Contents



TM
 TM TM
  Pro Forma Effect of Merger and Acquisition
  Year
ended December 31, 2006(unaudited)Net
    
    
    Net LossRevenue
    
    
    Loss
    
    
    Per ShareAs reported
    
    $
    47,409
    
    
    $
    (42,421
    )
    
    $
    (0.18
    )Pro forma adjustments
    
    
    1,051
    
    
    
    809
    
    
    
    $
    48,460
    
    
    $
    (41,612
    )
    
    $
    (0.18
    )Pro Forma Weighted Average Number
of Shares (in thousands)
    
    
    
    
    
    
    
    
    
    
    236,840
 Income Taxes
 FIN 48
   86




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##### Table of Contents



Consolidated Statements of Cash Flows
 TM
 Additional U.S. GAAP Disclosures
 Oil and Gas Properties and Development Costs
  As at December 31, 2008Business andTechnologyCanada
    
    
    Ecuador
    
    
    China
    
    
    U.S.
    
    
    Development
    
    
    TotalProperty acquisition costs
    
    $
    75,732
    
    
    $
    863
    
    
    $
    31,137
    
    
    $
    22,672
    
    
    $
    
    
    
    $
    130,404Royalty rights acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,582
    
    
    
    
    
    
    
    10,582Capitalized Interest
    
    
    1,672
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,672Exploration costs
    
    
    3,686
    
    
    
    591
    
    
    
    31,578
    
    
    
    42,759
    
    
    
    
    
    
    
    78,614Development costs
    
    
    
    
    
    
    
    
    
    
    83,315
    
    
    
    41,413
    
    
    
    
    
    
    
    124,728HTLTM facilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,590
    
    
    
    19,590Support equipment and general property
    
    
    20
    
    
    
    90
    
    
    
    412
    
    
    
    538
    
    
    
    406
    
    
    
    1,46681,110
    
    
    
    1,544
    
    
    
    146,442
    
    
    
    117,964
    
    
    
    19,996
    
    
    
    367,056Accumulated depletion and depreciation
    
    
    (6
    )
    
    
    
    
    
    
    (72,030
    )
    
    
    (30,571
    )
    
    
    (7,628
    )
    
    
    (110,235
    )Provision for impairment
    
    
    
    
    
    
    
    
    
    
    (55,050
    )
    
    
    (79,700
    )
    
    
    
    
    
    
    (134,750
    )$
    81,104
    
    
    $
    1,544
    
    
    $
    19,362
    
    
    $
    7,693
    
    
    $
    12,368
    
    
    $
    122,071
 As at December 31, 2007Business andTechnologyChina
    
    
    U.S.
    
    
    Development
    
    
    TotalProperty acquisition costs
    
    $
    31,137
    
    
    $
    22,196
    
    
    $
    
    
    
    $
    53,333Royalty rights acquired
    
    
    
    
    
    
    10,582
    
    
    
    
    
    
    
    10,582Capitalized Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exploration costs
    
    
    29,621
    
    
    
    42,721
    
    
    
    
    
    
    
    72,342Development costs
    
    
    76,895
    
    
    
    37,272
    
    
    
    
    
    
    
    114,167HTLTM facilities
    
    
    
    
    
    
    
    
    
    
    14,412
    
    
    
    14,412Support equipment and general property
    
    
    410
    
    
    
    529
    
    
    
    108
    
    
    
    1,047138,063
    
    
    
    113,300
    
    
    
    14,520
    
    
    
    265,883Accumulated depletion and depreciation
    
    
    (51,643
    )
    
    
    (25,315
    )
    
    
    (5,138
    )
    
    
    (82,096
    )Provision for impairment
    
    
    (33,490
    )
    
    
    (59,400
    )
    
    
    
    
    
    
    (92,890
    )$
    52,930
    
    
    $
    28,585
    
    
    $
    9,382
    
    
    $
    90,897
  87




---



##### Table of Contents



Incurred inPrior toTotal
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2006Property Acquisition
    
    $
    77,901
    
    
    $
    77,209
    
    
    $
    33
    
    
    $
    24
    
    
    $
    635Royalty rights
    
    
    659
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    659Exploration
    
    
    12,315
    
    
    
    7,290
    
    
    
    258
    
    
    
    212
    
    
    
    4,555$
    90,875
    
    
    $
    84,499
    
    
    $
    291
    
    
    $
    236
    
    
    $
    5,849
  Incurred inPrior toTotal
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2006CanadaTamarack
    
    $
    81,090
    
    
    $
    81,090
    
    
    $
    
    
    
    $
    
    
    
    $
    EcuadorBlock 20
    
    
    1,454
    
    
    
    1,454
    
    
    
    
    
    
    
    
    
    
    
    ChinaZitong Block
    
    
    5,233
    
    
    
    1,935
    
    
    
    258
    
    
    
    57
    
    
    
    2,983U.S.Knights Landing
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    144
    
    
    
    856San Joaquin Basin prospects  other
    
    
    2,098
    
    
    
    20
    
    
    
    33
    
    
    
    35
    
    
    
    2,0103,098
    
    
    
    20
    
    
    
    33
    
    
    
    179
    
    
    
    2,866$
    90,875
    
    
    $
    84,499
    
    
    $
    291
    
    
    $
    236
    
    
    $
    5,849
     Accounts Payable and Accrued Liabilities
  As at December 31,2008
    
    
    2007Trade payables
    
    $
    4,835
    
    
    $
    6,896Accrued general and administrative expenses
    
    
    1,130
    
    
    
    722Accrued operating expenses
    
    
    558
    
    
    
    561Accrued capital expenditures
    
    
    2,163
    
    
    
    620Accrued salaries and related expenses
    
    
    328
    
    
    
    82Accrued interest
    
    
    1,027
    
    
    
    65Other accruals
    
    
    52
    
    
    
    592$
    10,093
    
    
    $
    9,538
  88




---



##### Table of Contents



SFAS No. 157
  Level 1:
 Level 2:
 Level 3:
   As at December 31, 2008Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalDerivative instruments assets
    
    $
    
    
    
    $
    2,159
    
    
    $
    
    
    
    $
    2,159Derivative instruments liabilities
    
    $
    1,121
    
    
    $
    
    
    
    $
    
    
    
    $
    1,121
  Impact of New and Pending U.S. GAAP Accounting Standards
 SFAS No. 161
   89




---



##### Table of Contents



QUARTERLY FINANCIAL DATA IN ACCORDANCE WITH CANADIAN AND U.S. GAAP (UNAUDITED)
 QUARTER ENDED2008
    
    
    20074th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr
    
    
    4th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st QtrTotal revenue:Canadian GAAP
    
    $
    25,143
    
    
    $
    35,626
    
    
    $
    (2,772
    )
    
    $
    11,169
    
    
    $
    5,848
    
    
    $
    8,823
    
    
    $
    9,589
    
    
    $
    9,257U.S. GAAP
    
    $
    30,538
    
    
    $
    50,267
    
    
    $
    (14,975
    )
    
    $
    8,001
    
    
    $
    6,966
    
    
    $
    12,393
    
    
    $
    7,685
    
    
    $
    7,065Net income (loss):Canadian GAAP
    
    $
    (13,980
    )
    
    $
    10,062
    
    
    $
    (21,731
    )
    
    $
    (8,544
    )
    
    $
    (18,849
    )
    
    $
    (7,232
    )
    
    $
    (6,579
    )
    
    $
    (6,547
    )U.S. GAAP
    
    $
    (45,399
    )
    
    $
    25,824
    
    
    $
    (32,981
    )
    
    $
    (10,495
    )
    
    $
    (16,094
    )
    
    $
    (2,551
    )
    
    $
    (1,211
    )
    
    $
    (7,536
    )Net income (loss) per share:Canadian GAAP
    
    $
    (0.05
    )
    
    $
    0.04
    
    
    $
    (0.09
    )
    
    $
    (0.03
    )
    
    $
    (0.07
    )
    
    $
    (0.03
    )
    
    $
    (0.03
    )
    
    $
    (0.03
    )U.S. GAAP
    
    $
    (0.17
    )
    
    $
    0.10
    
    
    $
    (0.13
    )
    
    $
    (0.04
    )
    
    $
    (0.07
    )
    
    $
    (0.01
    )
    
    $
    
    
    
    $
    (0.03
    )
 TM
 
 SUPPLEMENTARY DISCLOSURES ABOUT OIL AND GAS PRODUCTION ACTIVITIES (UNAUDITED)  (all tabular amounts are expressed in thousands of U.S. Dollars, except reserves and depletion rate
amounts)
  Oil and Gas Reserves
      90




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##### Table of Contents



Oil (MBbl)
    
    
    Gas (MMcf)U.S.
    
    
    China
    
    
    Total
    
    
    U.S.Net proved reserves, December 31, 2005
    
    
    1,272
    
    
    
    1,300
    
    
    
    2,572
    
    
    
    1,685Revisions of previous estimates
    
    
    54
    
    
    
    179
    (1)
    
    
    233
    
    
    
    (214
    )Extensions and discoveries
    
    
    189
    (2)
    
    
    
    
    
    
    189
    
    
    
    Purchases of reserves in place
    
    
    
    
    
    
    881
    (3)
    
    
    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
    
    
    
    417Revisions of previous estimates
    
    
    84
    
    
    
    (22
    )
    
    
    62
    
    
    
    (52
    )Extensions and discoveries
    
    
    23
    
    
    
    
    
    
    
    23
    
    
    
    Production
    
    
    (192
    )
    
    
    (483
    )
    
    
    (675
    )
    
    
    (31
    )Net proved reserves, December 31, 2007
    
    
    1,135
    
    
    
    1,280
    
    
    
    2,415
    
    
    
    334Revisions of previous estimates
    
    
    (294
    )(4)
    
    
    242
    (5)
    
    
    (52
    )
    
    
    (168
    )(6)Extensions and discoveries
    
    
    103
    (7)
    
    
    
    
    
    
    103
    
    
    
    Production
    
    
    (199
    )
    
    
    (490
    )
    
    
    (689
    )
    
    
    (22
    )Net proved reserves, December 31, 2008
    
    
    745
    
    
    
    1,032
    
    
    
    1,777
    
    
    
    144
 (1)
    
    These technical revisions were due to production performance, plus ongoing production
optimizations.(2)
    
    This adjustment was related to a new pool discovery in the Companys South Midway
prospect.(3)
    
    In February of 2006 the Company re-acquired its 40% working interest in the Dagang
field.(4)
    
    The oil reserve revision decrease is due to the low year end oil prices and its
resulting affect on the economic limit for the Midway Sunset and West Texas properties.(5)
    
    The oil reserve revision is due to better performance of the Dagang property in
relation to the 2007 Reserve Report.(6)
    
    The gas reserve revision decrease is due to the underperformance of the West Texas
properties in relation to the 2007 Reserve Report.(7)
    
    The oil reserve additions are new locations in an area of the Midway Sunset Field prove
up by the drilling program in the Spring of 2008. 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.
  2008U.S.
    
    
    China
    
    
    TotalFuture cash inflows
    
    $
    24,742
    
    
    $
    42,906
    
    
    $
    67,648Future development and restoration costs
    
    
    2,790
    
    
    
    3,310
    
    
    
    6,100Future production costs
    
    
    18,046
    
    
    
    22,934
    
    
    
    40,980Future net cash flows
    
    
    3,906
    
    
    
    16,662
    
    
    
    20,56810% annual discount
    
    
    940
    
    
    
    2,576
    
    
    
    3,516Standardized measure
    
    $
    2,966
    
    
    $
    14,086
    
    
    $
    17,052
  91




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##### Table of Contents



2007U.S.
    
    
    China
    
    
    TotalFuture cash inflows
    
    $
    99,301
    
    
    $
    118,911
    
    
    $
    218,212Future development and restoration costs
    
    
    3,490
    
    
    
    5,190
    
    
    
    8,680Future production costs
    
    
    38,935
    
    
    
    52,446
    
    
    
    91,381Future income taxes
    
    
    
    
    
    
    1,010
    
    
    
    1,010Future net cash flows
    
    
    56,876
    
    
    
    60,265
    
    
    
    117,14110% annual discount
    
    
    13,616
    
    
    
    10,674
    
    
    
    24,290Standardized measure
    
    $
    43,260
    
    
    $
    49,591
    
    
    $
    92,851
 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
  2008U.S.
    
    
    China
    
    
    TotalSale of oil and gas, net of production costs
    
    $
    (12,984
    )
    
    $
    (26,855
    )
    
    $
    (39,839
    )Net changes in prices and production costs
    
    
    (26,330
    )
    
    
    (21,620
    )
    
    
    (47,950
    )Extensions and discoveries, net of future
production and development costs
    
    
    768
    
    
    
    
    
    
    
    768Net change in future development costs
    
    
    (1,701
    )
    
    
    (2,708
    )
    
    
    (4,409
    )Development costs incurred during the period
that reduced future development costs
    
    
    2,559
    
    
    
    4,720
    
    
    
    7,279Revisions of previous quantity estimates
    
    
    (1,762
    )
    
    
    3,739
    
    
    
    1,977Accretion of discount
    
    
    4,326
    
    
    
    4,959
    
    
    
    9,285Net change in income taxes
    
    
    
    
    
    
    925
    
    
    
    925Changes in production rates (timing) and other
    
    
    (5,170
    )
    
    
    1,335
    
    
    
    (3,835
    )Decrease
    
    
    (40,294
    )
    
    
    (35,505
    )
    
    
    (75,799
    )Standardized measure, beginning of year
    
    
    43,260
    
    
    
    49,591
    
    
    
    92,851Standardized measure, end of year
    
    $
    2,966
    
    
    $
    14,086
    
    
    $
    17,052
 2007U.S.
    
    
    China
    
    
    TotalSale of oil and gas, net of production costs
    
    $
    (7,951
    )
    
    $
    (18,365
    )
    
    $
    (26,316
    )Net changes in prices and production costs
    
    
    22,823
    
    
    
    16,322
    
    
    
    39,145Extensions and discoveries, net of future
production and development costs
    
    
    465
    
    
    
    
    
    
    
    465Net change in future development costs
    
    
    
    
    
    
    (3,545
    )
    
    
    (3,545
    )Development costs incurred during the period
that reduced future development costs
    
    
    
    
    
    
    10,188
    
    
    
    10,188Revisions of previous quantity estimates
    
    
    2,900
    
    
    
    (898
    )
    
    
    2,002Accretion of discount
    
    
    2,309
    
    
    
    4,279
    
    
    
    6,588Net change in income taxes
    
    
    
    
    
    
    (925
    )
    
    
    (925
    )Changes in production rates (timing) and other
    
    
    (374
    )
    
    
    (257
    )
    
    
    (631
    )Increase
    
    
    20,172
    
    
    
    6,799
    
    
    
    26,971Standardized measure, beginning of year
    
    
    23,088
    
    
    
    42,792
    
    
    
    65,880Standardized measure, end of year
    
    $
    43,260
    
    
    $
    49,591
    
    
    $
    92,851
  92




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##### Table of Contents



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
  For the year ended December 31,2008
    
    
    2007
    
    
    2006CanadaProperty acquisitionUnproved
    
    $
    75,732
    
    
    $
    
    
    
    $
    Exploration
    
    
    5,357
    
    
    
    
    
    
    
    81,089
    
    
    
    
    
    
    
    EcuadorProperty acquisitionUnproved
    
    
    863
    
    
    
    
    
    
    
    Exploration
    
    
    591
    
    
    
    
    
    
    
    1,454
    
    
    
    
    
    
    
    ChinaProperty acquisitionProved
    
    
    
    
    
    
    
    
    
    
    28,719Exploration
    
    
    1,956
    
    
    
    11,611
    
    
    
    2,485Development
    
    
    6,420
    
    
    
    11,881
    
    
    
    6,1538,376
    
    
    
    23,492
    
    
    
    37,357U.S.Property acquisitionUnproved
    
    
    477
    
    
    
    702
    
    
    
    881Exploration
    
    
    37
    
    
    
    202
    
    
    
    1,230Development
    
    
    5,354
    
    
    
    3,087
    
    
    
    3,4655,868
    
    
    
    3,991
    
    
    
    5,576Total
    
    $
    96,787
    
    
    $
    27,483
    
    
    $
    42,933
  U.S.Year ended December 31, 2008
    
    $
    25.60Year ended December 31, 2007
    
    $
    22.05Year ended December 31, 2006
    
    $
    22.11ChinaYear ended December 31, 2008
    
    $
    41.61Year ended December 31, 2007
    
    $
    32.73Year ended December 31, 2006
    
    $
    36.46
  93




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##### Table of Contents



2008
    
    
    2007
    
    
    2006U.S.
    
    
    China
    
    
    Total
    
    
    U.S.
    
    
    China
    
    
    Total
    
    
    U.S.
    
    
    China
    
    
    TotalOil and gas revenue
    
    $
    18,120
    
    
    $
    48,370
    
    
    $
    66,490
    
    
    $
    12,270
    
    
    $
    31,365
    
    
    $
    43,635
    
    
    $
    12,065
    
    
    $
    35,683
    
    
    $
    47,748Operating costs
    
    
    5,137
    
    
    
    21,515
    
    
    
    26,652
    
    
    
    4,319
    
    
    
    13,000
    
    
    
    17,319
    
    
    
    4,299
    
    
    
    11,834
    
    
    
    16,133Depletion
    
    
    5,229
    
    
    
    20,385
    
    
    
    25,614
    
    
    
    4,381
    
    
    
    15,832
    
    
    
    20,213
    
    
    
    4,858
    
    
    
    20,966
    
    
    
    25,824Provision for impairment
    
    
    20,300
    
    
    
    21,560
    
    
    
    41,860
    
    
    
    
    
    
    
    5,850
    
    
    
    5,850
    
    
    
    7,600
    
    
    
    15,940
    
    
    
    23,540Results of operations
from
producing activities
    
    $
    (12,546
    )
    
    $
    (15,090
    )
    
    $
    (27,636
    )
    
    $
    3,570
    
    
    $
    (3,317
    )
    
    $
    253
    
    
    $
    (4,692
    )
    
    $
    (13,057
    )
    
    $
    (17,749
    )
 
 ITEM 9.
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
   94




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##### Table of Contents



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.
 /s/ Robert M. Friedland
    
    /s/ W. Gordon LancasterRobert M. Friedland
    
    W. Gordon LancasterChief Executive Officer
    
    Chief Financial Officer
  REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
 Ivanhoe Energy Inc.:
 Internal
ControlIntegrated Framework
  95




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##### Table of Contents



Internal Control
 Integrated Framework
   
 CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  
 ITEM 9B. OTHER INFORMATION
   96




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##### Table of Contents



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 YearsA. ROBERT ABBOUD, age 79
Barrington Hills, IL
    
    Co-Chairman and 
Independent Lead Director
(since May 2006)
    
    President, A. Robert Abboud and Company, a private
investment company (1984  present)ROBERT M. FRIEDLAND, age 58
Singapore
    
    Executive Co-Chairman,
President & Chief
Executive Officer (since
May 2008)
Director (since February
1995)
    
    Executive Co-Chairman, President & Chief Executive
Officer, Ivanhoe Energy Inc. (May 2008  present);
Deputy Chairman, Ivanhoe Energy Inc. (June, 1999 -
May, 2008); Executive Chairman, Ivanhoe Mines Ltd.
(March 1994  present); Chairman, Ivanhoe Capital
Corporation (January 1991  present); President,
Ivanhoe Capital Corporation (July 1988  present)HOWARD R. BALLOCH, age 57
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)ROBERT G. GRAHAM, age 55
Ottawa, Ontario
    
    Director (since April 2005)
    
    Chairman of Board of Directors and Chief Executive
Officer, Ensyn Corporation (July 2008  Present);
Chairman of the Board of Directors, Ensyn
Corporation (June 2007  July 2008); President and
CEO, Ensyn Corporation (April 2005  June 2007);
Chairman and CEO, Ensyn Group (October 1984 April
2005)ROBERT A. PIRRAGLIA, age 59
Boca Raton, Florida
    
    Director (since April 2005)
    
    Executive Vice President, Ensyn Corporation (October
2007  Present); Chief Operating Officer and Vice
President, Ensyn Corporation (April 2005  October
2007); Chief Operating Officer and Vice President,
Ensyn Group, Inc. (September 1998  April 2005)BRIAN F. DOWNEY, C.M.A. age 67
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)PETER G. MEREDITH C.A., age
66
Vancouver, British Columbia
    
    Director (since December
2007)
    
    Deputy Chairman, Ivanhoe Mines Ltd. (May 2006 -
present): Chief Financial Officer, Ivanhoe Capital
Corporation (1996  March 2009); Chief Executive
Officer, SouthGobi Energy Resources (June 2007 -
present), Chief Financial Officer, Ivanhoe Mines
Ltd. (June 1999  November 2001)W. GORDON LANCASTER, C.A.,
age 65
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)MICHAEL
A. SILVERMAN, age 56
Houston, Texas
    
    Executive Vice President,
Technology and Chief
Technology Officer
(since September 2007)
    
    Executive Vice President, Technology and Chief
Technology Officer, Ivanhoe Energy Inc. (September
2007  present); Vice President, Technology, Ivanhoe
Energy Inc. (May 2007  September 2007); Vice
President Technology, KBR, Inc. (May 2004  May
2007); Director Technology Center, KBR, Inc. (May
2000  May 2004)EDWIN J. VEITH, age 50
Frazier Park, California
    
    Executive Vice President,
Upstream
(since September 2007)
    
    Executive Vice President, Upstream, Ivanhoe Energy
Inc. (September 2007  present); Vice President, HTL
Technology, Ivanhoe Energy (USA) Inc. (November 2005
- present); Chief Reservoir Engineer, Ivanhoe Energy
(USA) Inc. (June 2001  November 2005)K. C. PATRICK CHUA, age 53
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 G. MOENCH, age 60
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)
  97




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##### Table of Contents



AGM
   Business Corporations Act
  Other Directorships
  Code of Business Conduct and Ethics
   98




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
 Named Executive Officers
 Compensation Discussion and Analysis
 Compensation and Benefits Committee, Philosophy and Goals
   
    
    to provide a strong incentive to management to contribute to the achievement of the
Companys short-term and long-term corporate goals;
 
    
    to ensure that the interests of the Companys executive officers and the interests of
the Companys shareholders are aligned;
 
    
    to enable us to attract, retain and motivate executive officers of the highest caliber
in light of the strong competition in the Companys industry for qualified personnel;
 
    
    to recognize that the successful implementation of the Companys corporate strategy
cannot necessarily be measured, at this stage of its development, only with reference to
quantitative measurement criteria of corporate or individual performance; and
 
    
    to provide fair, transparent, and defensible compensation
  Recent Developments Relating to Executive Compensation
     99




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##### Table of Contents



How We Make Compensation Decisions
    Elements of Total Compensation
   
    
    Base salary  paid in cash as a fixed amount of compensation for performing day-to-day
responsibilities.
 
    
    Performance Bonus  Annual bonus awards, paid in common shares or cash, or both, earned
for achieving strategic corporate, business unit or individual goals.
 
    
    Incentive Awards  Equity incentives, in the form of stock options granted to align
compensation with achievement of the Companys goals, creation of shareholder value, and
retention of executives over a longer period.
  Peer Comparator Group
   100




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##### Table of Contents



Base Salary
   Annual Bonus
     Incentive Compensation
    101




---



##### Table of Contents



2008 Executive Compensation Decisions
 Salary Compensation
  Bonus Compensation
      102




---



##### Table of Contents



Incentive Compensation
   Other Compensation
   103




---



##### Table of Contents



2007 INCENTIVE BONUS CHART
AWARDED IN JULY 2008
 Gasca  CEO
    
    
    Lancaster  CFO
    
    
    Silverman  CTO
    
    
    Veith  EVP(1)
    
    
    Chua  EVPBonus Target: 50%(2)
    
    
    Bonus Target: 40%(2)
    
    
    Bonus Target: 40%(2)
    
    
    Bonus Target: 35%(2)
    
    
    Bonus Target: 30%(2)Bonus Maximum: 70%
    
    
    Bonus Maximum: 60%
    
    
    Bonus Maximum: 60%
    
    
    Bonus Maximum: 52.5%
    
    
    Bonus Maximum: 45%Achievement
    
    
    % Total
    
    
    
    
    
    
    % Total
    
    
    
    
    
    
    % Total
    
    
    
    
    
    
    % Total
    
    
    
    
    
    
    % TotalCompany Goals that are
    
    of Company
    
    
    Bonus
    
    
    % Base
    
    
    Bonus
    
    
    % Base
    
    
    Bonus
    
    
    % Base
    
    
    Bonus
    
    
    % Base
    
    
    Bonus
    
    
    % Baselinked to Executive Bonus
    
    Goals in
    
    
    Attributed to
    
    
    Salary
    
    
    Attributed to
    
    
    Salary
    
    
    Attributed to
    
    
    Salary
    
    
    Attributed to
    
    
    Salary
    
    
    Attributed to
    
    
    SalaryCompensation(6)
    
    2007(3)
    
    
    Goal(4)
    
    
    Earned(5)
    
    
    Goal(4)
    
    
    Earned
    
    
    Goal(4)
    
    
    Earned
    
    
    Goal(4)
    
    
    Earned
    
    
    Goal(4)
    
    
    EarnedPerformance Rating
    
    
    100
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    20
    %
    
    
    8
    %
    
    
    25
    %
    
    
    10
    %
    
    
    25
    %
    
    
    9
    %
    
    
    30
    %
    
    
    9
    %Share Price/Market Cap Target
    
    
    0
    %
    
    
    10
    %
    
    
    0
    %
    
    
    10
    %
    
    
    0
    %
    
    
    10
    %
    
    
    0
    %
    
    
    10
    %
    
    
    0
    %
    
    
    10
    %
    
    
    0
    %Investor/Corp Communications
    
    
    85
    %
    
    
    15
    %
    
    
    6
    %
    
    
    5
    %
    
    
    2
    %
    
    
    5
    %
    
    
    2
    %
    
    
    5
    %
    
    
    1
    %
    
    
    0
    %
    
    
    0
    %Governance/Corporate Reporting
    
    
    100
    %
    
    
    15
    %
    
    
    8
    %
    
    
    25
    %
    
    
    10
    %
    
    
    5
    %
    
    
    2
    %
    
    
    5
    %
    
    
    2
    %
    
    
    10
    %
    
    
    3
    %Human Resource Mgmt.
    
    
    40
    %
    
    
    10
    %
    
    
    2
    %
    
    
    10
    %
    
    
    2
    %
    
    
    10
    %
    
    
    2
    %
    
    
    10
    %
    
    
    1
    %
    
    
    5
    %
    
    
    1
    %Financial Mgmt (incl. raising capital)
    
    
    100
    %
    
    
    10
    %
    
    
    5
    %
    
    
    15
    %
    
    
    6
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    
    
    
    
    0
    %Net Income Target
    
    
    0
    %
    
    
    5
    %
    
    
    0
    %
    
    
    5
    %
    
    
    0
    %
    
    
    5
    %
    
    
    0
    %
    
    
    5
    %
    
    
    0
    %
    
    
    5
    %
    
    
    0
    %Net Operating Cash Flow Target
    
    
    0
    %
    
    
    5
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    5
    %
    
    
    0
    %
    
    
    5
    %
    
    
    0
    %
    
    
    5
    %
    
    
    0
    %Capex Management Target
    
    
    100
    %
    
    
    5
    %
    
    
    3
    %
    
    
    5
    %
    
    
    2
    %
    
    
    5
    %
    
    
    2
    %
    
    
    5
    %
    
    
    2
    %
    
    
    5
    %
    
    
    2
    %Safety, Health and Environmental Targets
    
    
    100
    %
    
    
    5
    %
    
    
    3
    %
    
    
    0
    %
    
    
    0
    %
    
    
    5
    %
    
    
    2
    %
    
    
    5
    %
    
    
    2
    %
    
    
    5
    %
    
    
    2
    %Net Production Target
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    10
    %
    
    
    0
    %Opex/Bbl Target
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    5
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    5
    %
    
    
    0
    %Business Development Target
    
    
    15
    %
    
    
    10
    %
    
    
    1
    %
    
    
    0
    %
    
    
    0
    %
    
    
    5
    %
    
    
    0
    %
    
    
    15
    %
    
    
    1
    %
    
    
    10
    %
    
    
    0
    %Technology Targets
    
    
    70
    %
    
    
    10
    %
    
    
    4
    %
    
    
    0
    %
    
    
    0
    %
    
    
    20
    %
    
    
    6
    %
    
    
    10
    %
    
    
    2
    %
    
    
    0
    %
    
    
    0
    %Individual Percentage Attained
    
    
    
    
    
    
    
    
    
    
    30.13
    %
    
    
    
    
    
    
    29.30
    %
    
    
    
    
    
    
    25.20
    %
    
    
    
    
    
    
    20.13
    %
    
    
    
    
    
    
    16.05
    %Current Salary
    
    
    
    
    
    US $315,500.00
    
    Cdn $262,330.00
    
    US $247,500.00
    
    US $220,000.00
    
    US $180,000.00Notional
Bonus Allocation
    
    
    
    
    
    US $94,893.75
    
    Cdn $78,862.69
    
    US $62,370.00
    
    US $44,275.00
    
    US $28,890.00Total
Amount of Bonus
Awarded(7)
    
    
    
    
    
    US$78,509
    
    US$52,461
    
    US$53,831
    
    US$53,381
    
    US$41,169
  104




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##### Table of Contents



1.
    
    Represents Bonus Target and Bonus Maximum for a partial year.2.
    
    Bonus Target and Bonus Maximum represent the potential range of a bonus that may be awarded as
a percentage of an executives base salary. The Bonus Target and Bonus Maximum are determined by
the executives pay grade, and whether or not the executive was employed by the Company for the
full financial year. For the financial year 2007, executive bonuses were calculated at the Bonus
Target percentage.3.
    
    The Companys Compensation Committee evaluated whether or not the Company achieved the goals
that were linked to executive compensation in 2007, and reported the percentage achievement of each
goal. This percentage achievement is used to determine the Bonus Compensation received by
executives.4.
    
    Each executives bonus is linked to a distinct subset of the Companys goals based on the
executives duties and responsibilities. The percentage of an executives bonus that is linked to
each of the Companys goals is set out in this column.5.
    
    The percent of the base salary earned is calculated by multiplying the percentage of
achievement of a Company goal by the percent of the executives bonus attributed to such Company
goal, and then multiplying the resulting product by the percentage Bonus Target of the executive.6.
    
    The Companys goals used to evaluate executive performance and calculate executive bonuses for
2007 are as follows:               7.
    
    Based on discretionary factors, the actual bonuses awarded varied somewhat from notional
bonuses determined in accordance with the foregoing chart.  105




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##### Table of Contents



Performance Graph
  
 As at December 31,(Cdn.$)2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008Ivanhoe Energy Inc.
    
    $
    100
    
    
    $
    63
    
    
    $
    25
    
    
    $
    32
    
    
    $
    32
    
    
    $
    12S&P/TSX Composite Index
    
    $
    100
    
    
    $
    114
    
    
    $
    142
    
    
    $
    167
    
    
    $
    183
    
    
    $
    123
 Exchange Act
  Option-Based Awards
    106




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##### Table of Contents



Summary Compensation Table
 Summary Compensation Table (U.S.$)
 Non-equityincentive plancompensation ($)Annual
    
    Long-termShare-based
    
    Option-based
    
    incentive
    
    incentive
    
    Pension
    
    All other
    
    TotalName and principal position
    
    Salary ($)
    
    awards ($)(7)
    
    awards ($)(5)
    
    plans
    
    plans(2)
    
    value ($)
    
    compensation ($)
    
    compensation ($)Friedland, Robert
Executive Co-Chairman,
President & CEO
    
    
    
    
    
    
    
    
    
    
    1,950,236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,950,236
    (1)Gasca, Joseph
President & CEO
    
    
    131,250
    (8)
    
    
    50,041
    
    
    
    
    
    
    
    28,468
    
    
    
    
    
    
    
    
    
    
    
    340,827
    (3)
    
    
    550,586Lancaster, Gordon
CFO
    
    
    259,552
    (4)
    
    
    29,965
    
    
    
    50,550
    
    
    
    69,626
    (4) (11)
    
    
    
    
    
    
    
    
    
    
    1,972
    (4)
    
    
    411,665Silverman, Michael
Executive Vice President
    
    
    261,938
    
    
    
    29,965
    
    
    
    
    
    
    
    73,866
    (11)
    
    
    
    
    
    
    
    
    
    
    32,945
    (6)
    
    
    398,714Veith, Edwin
Executive Vice President
    
    
    239,250
    
    
    
    29,965
    
    
    
    
    
    
    
    73,866
    (11)
    
    
    
    
    
    
    
    
    
    
    39,549
    (9)
    
    
    382,630Chua, Patrick
Executive Vice President
    
    
    228,600
    
    
    
    18,200
    
    
    
    60,660
    
    
    
    22,969
    
    
    
    
    
    
    
    
    
    
    
    3,801
    (10)
    
    
    334,230
  (1)
    
    Mr. Friedland is also a director of the Company. Pursuant to the Companys policies regarding
management directors, Mr. Friedland does not receive compensation from the Company for acting as a
director, and no portion of the Total Compensation disclosed in the summary compensation table was
received by Mr. Friedland as compensation for acting as a director.(2)
    
    The Company does not presently have a long-term incentive plan for any of its executive
officers, including its Named Executive Officers.(3)
    
    Includes: $131,250 payable in 2009 to Mr. Gasca pursuant to the terms of his termination
agreement; $20,400 paid as a contribution to Mr. Gascas 401(k) retirement plan; $184,100 paid to
Mr. Gasca in 2008 pursuant to the terms of his termination agreement; and, $5,077 paid for life
insurance and long term disability premiums. For further information, please see: Termination and
Change of Control Benefits.(4)
    
    Amounts were paid to Mr. Lancaster in Canadian currency. Salary has been converted to US
currency based on the noon buying price for Canadian currency of the Federal Reserve Bank of New
York on the date of each pay period during 2008. Annual Incentive Plan amounts were converted at
the US Federal Reserve noon rate on August 15, 2008: 0.9426.(5)
    
    The Company used the Black-Scholes option-pricing model for determining the fair value of stock
options issued at the grant date. The practice of the Company is to grant all option based awards
in Canadian currency, then convert the grant date fair value amount to U.S. currency for reporting
the value of the grants in the Companys financial statements. The conversion rate is the noon
buying price for Canadian currency of the Federal Reserve Bank of New York on the date the grant is
made which was 0.9897 for the options granted to Mr. Friedland, and 0.9871 for the options granted
to each of Messrs. Lancaster and Chua.(6)
    
    Includes: $20,496 paid as a contribution to Mr. Silvermans 401(k) retirement plan; and,
$12,449 paid for life insurance and long term disability premiums.(7)
    
    The grant date fair value is determined by the closing trading price of the Companys common
shares on the day the Company delivered a treasury order for the share based award to the Companys
transfer agent. The share based awards granted to the Named Executive Officers and listed in the
Summary Compensation Table were based on the closing price of the Companys common shares on August
5, 2008. The grant date fair value was US$2.26.(8)
    
    Includes compensation paid until Mr. Gascas employment ended in May 2008.(9)
    
    Includes: $19,958 paid as a contribution to Mr. Veiths 401(k) retirement plan; and, $19,591
paid for life insurance and long term disability premiums.(10)
    
    Includes $3,801 paid for life insurance and long term disability premiums.(11)
    
    Includes US$50,000 for each of Messrs. Silverman and Veith, and Cdn$50,000 for Mr. Lancaster
(converted to US$47,130 at the US Federal Reserve noon rate on August 15, 2008: 0.9426), that was
paid on August 15, 2008, as an advance on bonuses payable for the year ending 2008, which are
normally determined and paid in mid-2009.  107




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##### Table of Contents



Incentive Plan Awards
 Outstanding share-based awards and option-based awards
 Option-based Awards
    
    
    Share-based AwardsMarket orNumber of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    payout valuesecurities
    
    
    
    
    
    
    
    
    
    
    Value of
    
    
    Number of
    
    
    of share-basedunderlying
    
    
    
    
    
    
    
    
    
    
    unexercised in-
    
    
    shares or units
    
    
    awards thatunexercised
    
    
    Option
    
    
    
    
    
    
    the-money
    
    
    of shares that
    
    
    have notoptions
    
    
    exercise price
    
    
    Option
    
    
    options
    
    
    have not vested
    
    
    vestedName
    
    (#)
    
    
    ($)
    
    
    expiration date
    
    
    (US$)(1)
    
    
    (#)
    
    
    (US$)Friedland, Robert 
Executive Co-Chairman, 
President & CEO
    
    
    2,500,000
    (2)
    
    Cdn$
    1.61
    
    
    March 5, 2013
    
    
    0
    
    
    
    0
    
    
    
    0Gasca, Joseph 
President & CEO
    
    
    
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    0
    
    
    
    0Lancaster, Gordon

CFO
    
    
    50,000
    (3)
    
    Cdn$
    1.68
    
    
    March 11, 2013
    
    
    0
    
    
    
    0
    
    
    
    0Silverman, Michael
    
    
    270,000
    (4)
    
    US$
    1.92
    
    
    Oct. 4, 2012Executive Vice President
    
    
    150,000
    (5)
    
    US$
    1.92
    
    
    Sept. 19, 201280,000
    (6)
    
    US$
    2.06
    
    
    May 28, 2012
    
    
    0
    
    
    
    0
    
    
    
    0Veith, Edwin
    
    
    158,000
    (4)
    
    US$
    1.92
    
    
    Oct. 4, 2012Executive Vice President
    
    
    250,000
    (7)
    
    US$
    2.70
    
    
    June 2, 201170,734
    (8)
    
    US$
    2.57
    
    
    April 18, 201122,000
    (9)
    
    US$
    3.06
    
    
    March 8, 2011
    
    
    0
    
    
    
    0
    
    
    
    0Chua, Patrick
    
    
    60,000
    (3)
    
    US$
    1.70
    
    
    March 11, 2013Executive Vice President
    
    
    40,000
    (6)
    
    US$
    2.06
    
    
    May 3, 2012
    
    
    0
    
    
    
    0
    
    
    
    0
  (1)
    
    The Value of unexercised in-the-money options is calculated on the basis of the difference
between the closing price of the common shares on the TSX on December 31, 2008 and the Exercise
Price of the options.(2)
    
    This option grant vests 20% on March 5, 2008, and 20% on each of the four anniversaries
thereafter, and will be fully vested on March 3, 2012.(3)
    
    This option grant vests 20% on March 11, 2008, and 20% on each of the four anniversaries
thereafter, and will be fully vested on March 11, 2012.(4)
    
    This option grant vested 20% on October 4, 2007, and will continue to vest over the four years
following October 4, 2007, upon the achievement of performance milestones.(5)
    
    This option grant vests 20% on September 19, 2007, and 20% on each of the four anniversaries
thereafter, and will be fully vested on September 19, 2011.(6)
    
    This option grant vests 25% on May 3, 2008, and 25% on each of the three anniversaries
thereafter, and will be fully vested on May 3, 2011.(7)
    
    This option grant vests 20% on June 2, 2006, and 20% on each of the four anniversaries
thereafter, and will be fully vested on June 2, 2010.(8)
    
    This option grant vests 20% on April 18, 2006, and 20% on each of the four anniversaries
thereafter, and will be fully vested on April 18, 2010.(9)
    
    This option grant vests 20% on March 8, 2006, and 20% on each of the four anniversaries
thereafter, and will be fully vested on March 8, 2010.  108




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##### Table of Contents



Incentive Plan Awards  value vested or earned during 2008
 Non-equity incentive planOption-based awards Value
    
    
    Share-based awards  Value
    
    
    compensation  Value earnedvested during the year
    
    
    vested during the year
    
    
    during the yearName
    
    (U.S.$)(3)
    
    
    (U.S.$)
    
    
    (U.S.$)Friedland, Robert
Executive Co-Chairman,
President & CEO
    
    Nil.
    

    
    
    
    
    
    
    Gasca, Joseph
President & CEO
    
    Nil.
    

    
    
    50,041
    
    
    
    28,468Lancaster, Gordon
CFO
    
    $
    1,792
    (2)
    
    
    29,965
    
    
    
    69,626
    (4)(1)Silverman, Michael
Executive Vice President
    
    Nil.
    
    
    
    29,965
    
    
    
    73,866
    (4)Veith, Edwin
Executive Vice President
    
    $
    646
    
    
    
    29,965
    
    
    
    73,866
    (4)Chua, Patrick
Executive Vice President
    
    $
    3,080
    
    
    
    18,200
    
    
    
    22,969
  (1)
    
    Amounts were paid to Mr. Lancaster in Canadian currency and have been converted to US currency
based on the noon buying price for Canadian currency of the Federal Reserve Bank of New York on the
date the award was paid.(2)
    
    The value vested during the year of options held by Mr. Lancaster was converted from Canadian
currency to US currency based on the noon buying rate of 0.9953 on March 11, 2008, the date Mr.
Lancasters in the money options vested.(3)
    
    A Nil amount indicates that no options held by the Named Executive Officer vested during 2008
at an in the money amount when the exercise price was compared to the closing price of the
Companys common shares on the TSX on the date of vesting.(4)
    
    Includes US$50,000 for each of Messrs. Silverman and Veith, and Cdn$50,000 for Mr. Lancaster
(converted to US currency at the US Federal Reserve rate on August 15, 2008: 0.9426), that was paid
in 2008 as an advance on bonuses for 2008, which are normally determined and paid in mid-2009.  109




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##### Table of Contents



Pension Plan Benefits
  Termination and Change of Control Benefits
         110




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##### Table of Contents



Director Compensation
 Director Compensation Table
(U.S.$)
 Non-equityShare-based
    
    
    Option-based
    
    
    incentive plan
    
    
    Pension
    
    
    All otherFees Earned
    
    
    awards
    
    
    awards
    
    
    compensation
    
    
    value
    
    
    compensation
    
    
    TotalName
    
    (US$)
    
    
    (US $)
    
    
    (US $)
    
    
    (US $)
    
    
    (US $)
    
    
    (US $)
    
    
    (US $)Abboud, A. Robert
    
    
    92,500
    (1)
    
    
    0
    
    
    
    66,725
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    159,225Balloch, Howard
    
    
    53,000
    
    
    
    0
    
    
    
    66,725
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    119,725Downey, Brian
    
    
    49,500
    
    
    
    0
    
    
    
    66,725
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    116,225Graham, Robert
    
    Nil
    (2)
    
    
    0
    
    
    
    66,725
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    66,725Meredith, Peter
    
    
    39,000
    
    
    
    0
    
    
    
    167,824
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    206,824Pirraglia, Robert
    
    
    42,500
    
    
    
    0
    
    
    
    66,725
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    109,225
  (1)
    
    Mr. Abboud was paid an all-inclusive annual fee of US$250,000 which provided for and included
director fees, Lead director fees and meeting fees customarily payable for the attendance of Board
or Committee meetings up until May 29, 2008, after which time he earned the regular retainer of
$24,000 per year plus individual meeting fees.(2)
    
    Mr. Graham did not receive any fees for acting as a director. A Company owned by Mr. Graham
received fees for consulting services rendered to the Company during 2008. See Item 13 Certain
Relationships and Related Transactions, and Director Independence. Share-based awards, option-based awards and non-equity incentive plan compensation
 Outstanding share-based awards and option-based awards
 Option-based Awards
    
    
    Share-based AwardsMarket orNumber of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    payout valuesecurities
    
    
    
    
    
    
    
    
    
    
    Value of
    
    
    Number of
    
    
    of share-basedunderlying
    
    
    
    
    
    
    
    
    
    
    unexercised in-
    
    
    shares or units
    
    
    awards thatunexercised
    
    
    Option
    
    
    
    
    
    
    the-money
    
    
    of shares that
    
    
    have notoptions
    
    
    exercise price
    
    
    Option
    
    options
    
    
    have not vested
    
    
    vestedName
    
    (#)
    
    
    ($)
    
    
    expiration date
    
    (US$)
    
    
    (#)
    
    
    (US$)Abboud, A. Robert
    
    
    50,000
    
    
    US$
    2.69
    
    
    May 29, 2013
    
    
    0
    
    
    
    0
    
    
    
    0480,000
    
    
    US$
    2.85
    
    
    May 15, 2011Balloch, Howard
    
    
    50,000
    
    
    Cdn$
    2.66
    
    
    May 29, 2013
    
    
    0
    
    
    
    0
    
    
    
    050,000
    
    
    Cdn$
    2.30
    
    
    May 3, 201250,000
    
    
    Cdn$
    3.12
    
    
    May 4, 201150,000
    
    
    Cdn$
    3.01
    
    
    May 5, 2010Downey, Brian
    
    
    50,000
    
    
    US$
    2.69
    
    
    May 29, 2013
    
    
    0
    
    
    
    0
    
    
    
    050,000
    
    
    US$
    2.06
    
    
    May 3, 201250,000
    
    
    US$
    2.80
    
    
    May 4, 2011150,000
    
    
    US$
    2.32
    
    
    July 22, 2010
  111




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##### Table of Contents



Option-based Awards
    
    
    Share-based AwardsMarket orNumber of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    payout valuesecurities
    
    
    
    
    
    
    
    
    
    
    Value of
    
    
    Number of
    
    
    of share-basedunderlying
    
    
    
    
    
    
    
    
    
    
    unexercised in-
    
    
    shares or units
    
    
    awards thatunexercised
    
    
    Option
    
    
    
    
    
    
    the-money
    
    
    of shares that
    
    
    have notoptions
    
    
    exercise price
    
    
    Option
    
    options
    
    
    have not vested
    
    
    vestedName
    
    (#)
    
    
    ($)
    
    
    expiration date
    
    (US$)
    
    
    (#)
    
    
    (US$)Graham, Robert
    
    
    50,000
    
    
    Cdn$
    2.66
    
    
    May 29, 2013
    
    
    0
    
    
    
    0
    
    
    
    0200,000
    
    
    Cdn$
    2.29
    
    
    March 8, 201250,000
    
    
    Cdn$
    3.12
    
    
    May 4, 2011150,000
    
    
    Cdn$
    3.01
    
    
    May 4, 2010Meredith, Peter
    
    
    50,000
    
    
    Cdn$
    2.66
    
    
    May 29, 2013
    
    
    0
    
    
    
    0
    
    
    
    0100,000
    
    
    Cdn$
    1.68
    
    
    March 11, 2013150,000
    
    
    Cdn$
    1.52
    
    
    Dec. 19, 2012Pirraglia, Robert
    
    
    50,000
    
    
    US$
    2.69
    
    
    May 29, 2013
    
    
    0
    
    
    
    0
    
    
    
    050,000
    
    
    US$
    2.06
    
    
    May 3, 201250,000
    
    
    US$
    2.80
    
    
    May 4, 2011200,000
    
    
    US$
    2.42
    
    
    May 5, 2010
 Incentive Plan Awards  value vested or earned during 2008
 Non-equity incentive planOption-based awards Value
    
    
    Share-based awards Value
    
    
    compensation Value earnedvested during the year
    
    
    vested during the year
    
    
    during the yearName
    
    (US$)
    
    
    (US$)
    
    
    (US$)Abboud, A. Robert
    
    Nil.
    
    
    0
    
    
    
    0Balloch, Howard
    
    Nil.
    
    
    0
    
    
    
    0Downey, Brian
    
    US$5,800
    
    
    0
    
    
    
    0Graham, Robert
    
    Nil.
    
    
    0
    
    
    
    0Meredith, Peter G.
    
    Nil.
    
    
    0
    
    
    
    0Pirraglia, Robert
    
    Nil.
    
    
    0
    
    
    
    0
  112




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##### Table of Contents



ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  Name and Address of
    
    
    Number of Shares
    
    
    PercentageTitle of Class
    
    Beneficial Owner
    
    
    Beneficially Owned (1)
    
    
    of ClassCommon Shares
    
    Robert M. Friedland
    
    
    52,411,725
    (2)
    
    
    18.44150 Beach Road#25-03 The Gateway WestSingapore  189720Common Shares
    
    Directors and Executive Officers as a Group (12 persons)
    
    
    59,934,095
    (3)
    
    
    21.08Common Shares
    
    Caisse de depot et placement du Québec
    
    
    17,022,822
    
    
    
    6.09Common Shares
    
    TD Asset Management Inc.
    
    
    14,700,801
    
    
    
    5.27
    (4)
 
 (1)
    
    Beneficial ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Unissued common shares subject
to options, warrants or other convertible securities currently exercisable or convertible, or
exercisable or convertible within 60 days, are deemed outstanding for the purpose of computing
the beneficial ownership of common shares of the person holding such convertible security but
are not deemed outstanding for computing the beneficial ownership of common shares of any
other person.(2)
    
    50,994,620 common shares are held indirectly through Newstar Securities SRL, Premier Mines
SRL and Evershine SRL, companies controlled by Mr. Friedland.(3)
    
    Includes 2,711,787 unissued common shares issuable to directors and senior officers upon
exercise of incentive stock options.(4)
    
    Based on 279,381,187 shares of common stock outstanding as of February 27, 2009, TD Asset
Management Inc.s percentage of share ownership is 5.27%. Security Ownership of Management
  Amountand Natureof Beneficial
    
    
    Percentage
    
    
    Incentive StockOwnership (1)
    
    
    of Class
    
    
    Options Included inTitle of Class
    
    Name of Beneficial Owner
    
    
    (a)
    
    
    (b)
    
    
    (a) (c)Common Shares
    
    A. Robert Abboud
    
    
    748,000
    
    
    
    .26
    
    
    
    248,000Common Shares
    
    Robert M. Friedland (2)
    
    
    52,411,725
    
    
    
    18.44
    
    
    
    1,000,000Common Shares
    
    Howard R. Balloch
    
    
    170,000
    
    
    
    .06
    
    
    
    120,000Common Shares
    
    Robert G. Graham
    
    
    4,855,112
    
    
    
    1.71
    
    
    
    310,000Common Shares
    
    Robert A. Pirraglia
    
    
    473,396
    
    
    
    .17
    
    
    
    240,000Common Shares
    
    Brian F. Downey
    
    
    250,000
    
    
    
    .09
    
    
    
    150,000Common Shares
    
    Peter G. Meredith
    
    
    148,000
    
    
    
    .05
    
    
    
    100,000Common Shares
    
    W. Gordon Lancaster
    
    
    84,710
    
    
    
    .03
    
    
    
    20,000Common Shares
    
    Michael A. Silverman
    
    
    147,259
    
    
    
    .05
    
    
    
    134,000Common Shares
    
    Edwin J. Veith
    
    
    305,424
    
    
    
    .11
    
    
    
    255,787Common Shares
    
    Patrick Chua
    
    
    128,318
    
    
    
    .04
    
    
    
    34,000Common Shares
    
    Gerald Moench
    
    
    212,151
    
    
    
    .07
    
    
    
    100,000Common Shares
    
    All directors and executive officers as a group (12 persons)
    
    
    59,934,095
    
    
    
    21.08
    
    
    
    2,711,787
 
 (1)
    
    Beneficial ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Unissued common shares subject
to options, warrants or other convertible securities currently exercisable or convertible, or
exercisable or convertible within 60 days, are deemed outstanding for the purpose of computing
the beneficial ownership of common shares of the person holding such convertible security but
are not deemed outstanding for computing the beneficial ownership of common shares of any
other person.(2)
    
    50,994,620 common shares are held indirectly through Newstar Securities SRL, Premier Mines
SRL and Evershine SRL, companies controlled by Mr. Friedland.  113




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Securities Authorized for Issuance under Equity Compensation Plans
  Equity Compensation Plan Information
 Number 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 (Cdn.$)
    
    
    securities reflected in column (a))Plan category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
Security holders
    
    
    11,628,303
    
    
    $
    2.33
    
    
    
    5,369,834Equity compensation
plans not approved
by Security holders
(1)
    
    
    285,000
    
    
    $
    2.13
    
    
    
    Total
    
    
    11,913,303
    
    
    $
    2.32
    
    
    
    5,369,834
 (1)
    
    The following stock options were not granted under the Companys Equity Incentive Plan
previously approved by shareholders and the common shares reserved for issuance upon the
exercise of the following stock options are not included in the total number of common shares
reserved for issuance under the Equity Incentive Plan: a.
    
    50,000 incentive stock options granted to Mr. Jim Pelham on April 17, 2008, as an
inducement to accepting employment with the Company. Under the rules and policies of the
TSX, stock options under security based compensation arrangements that do no exceed
prescribed thresholds may be offered to prospective officers as an inducement to
employment without shareholder approval.
 b.
    
    50,000 stock options granted to Ms. Mariola Lepak on April 17, 2008; 35,000 stock
options granted to Mr. Mark Savage on April 17, 2008; and, 150,000 stock options granted
to Mr. Brian Wilson on April 28, 2008. The stock options issued to Ms. Mariola Lepak
have been terminated. Under the rules and policies of the TSX, the grants to Messrs.
Savage and Wilson require shareholder ratification prior to the exercise of any of the
options.
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Transactions with Management and Others
  Certain Business Relationships
      114




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
  Year ended December 31,2008
    
    
    2007% of fees
    
    
    
    
    
    
    % of feesapproved by
    
    
    
    
    
    
    approved byCdn.($000)
    
    
    Audit Committee
    
    
    Cdn.($000)
    
    
    Audit CommitteeAudit fees (a)
    
    $
    1,901
    
    
    
    100
    %
    
    $
    702
    
    
    
    100
    %Tax fees (b)
    
    
    98
    
    
    
    100
    %
    
    
    80
    
    
    
    100
    %All other fees (c)
    
    
    15
    
    
    
    100
    %
    
    
    
    
    
    
    $
    2,014
    
    
    
    
    
    
    $
    782
 (a)
    
    Fees for audit services billed in 2008 and 2007 consisted of: 
    
    Audit of our annual financial statements
    
    Reviews of our quarterly financial statements
    
    Audit of our internal control over financial reporting in compliance with the
requirements of the Sarbanes Oxley Act of 2002.
    
    Comfort letters, statutory and regulatory audits, consents and other services related to
Canadian and U.S. securities regulatory matters
    
    Activities related to the audit of our Chinese subsidiary in contemplation of an initial
public offering totaling Cdn.$970,000 in 2008
 (b)
    
    Fees for tax services billed in 2008 and 2007 consisted of tax compliance and tax planning
and advice: 
    
    Fees for tax compliance services totaled Cdn.$87,000 and Cdn.$62,000 in 2008 and 2007,
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.$11,000 and Cdn.$18,000 in 2008
and 2007, respectively. Tax planning and advice are services rendered with respect to
proposed transactions or that alter a transaction to obtain a particular tax result. Such
services consisted of tax advice related to structuring certain proposed mergers,
acquisitions and disposals.
 (c)
    
    All other fees includes fees for services billed in 2008 and 2007 other than the services
reported as Audit fees or Tax fees and include such items as the CPAB billing, a
subscription to an accounting research tool and human capital salary information.  Audit Committee Pre-Approval Policy
  Disclosure Categories Service List
   115




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  Exhibits3.1
    
    
    Articles of Ivanhoe Energy Inc. as amended May 3, 2007 (Incorporated by reference to Exhibit 3.1 of
Form 10-K filed with the Securities and Exchange Commission on March 17, 2008)3.2
    
    
    Bylaws of Ivanhoe Energy Inc. as amended May 15, 2001 and further amended March 8, 2007 (Incorporated
by reference to Exhibit 3.2 of Form 10-K filed with the Securities and Exchange Commission on March
17, 2008)10.1
    
    
    Petroleum Contract for Kongnan Block, Dagang Oilfield of the Peoples Republic of China dated
September 8, 1997 between China National Petroleum Corporation and Pan-China Resources Ltd., as
amended June 11, 1999 (Incorporated by reference to Exhibit 3.15 of Form 20-F filed with the
Securities and Exchange Commission on February 28, 2000)10.2
    
    
    Master License Agreement Amendment No. 1 dated October 11, 2000 between Syntroleum Corporation and
Ivanhoe Energy Inc. (Incorporated by reference to Exhibit 10.18 of Form 10-K filed with the Securities
and Exchange Commission on March 16, 2001)10.3
    
    
    Petroleum Contract dated September 19, 2002 between China National Petroleum Corporation and Pan-China
Resources Ltd. for Zitong Block, Sichuan Basin of the Peoples Republic of China (Incorporated by
reference to Exhibit 10.12 of Form 10-K filed with the Securities and Exchange Commission on March 19,
2003)10.4
    
    
    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 as amended May 3, 2007 (Incorporated by reference to
Exhibit 10.5 of Form 10-K filed with the Securities and Exchange Commission on March 17, 2008)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)
  116




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##### Table of Contents



Exhibits10.10
    
    
    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)10.11
    
    
    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)10.12
    
    
    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)10.13
    
    
    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)10.14
    
    
    Facility Agreement, dated September 14, 2007 between Pan-China Resources Ltd., Sunwing Energy Ltd.,
Sunwing Holding Corporation, Sunwing Zitong Energy Ltd., Standard Bank PLC and Standard Bank Asia
Limited (Incorporated by reference to Exhibit 10.15 of Form 10-Q filed with the Securities and
Exchange Commission on November 8, 2007)10.15
    
    
    Credit Agreement, dated October 30, 2006 between Ivanhoe Energy (USA) Inc. and LaSalle Bank N.A .
(Incorporated by reference to Exhibit 10.15 of Form 10-K filed with the Securities and Exchange
Commission on March 17, 2008)10.16
    
    
    Indemnification Agreements entered into during the first quarter of 2008 between Ivanhoe Energy Inc.
and its executive officers and directors (Incorporated by reference to Exhibit 10.16 of Form 10-K
filed with the Securities and Exchange Commission on March 17, 2008)10.17
    
    
    Employment Agreement dated May 2, 2007 between Ivanhoe Energy Inc. and Michael Silverman (Incorporated
by reference to Exhibit 10.17 of Form 10-K filed with the Securities and Exchange Commission on March
17, 2008)10.18
    
    
    Asset Transfer Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and Talisman Energy Canada
(Incorporated by reference to Exhibit 10.1 of Form 10-Q filed with the Securities and Exchange
Commission on August 11, 2008)10.19
    
    
    Back-In Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and Talisman Energy Canada
(Incorporated by reference to Exhibit 10.2 of Form 10-Q filed with the Securities and Exchange
Commission on August 11, 2008)10.20
    
    
    Cdn. $12.5 million Promissory Note in favour of Talisman Energy Canada due 31, 2008 (Incorporated by
reference to Exhibit 10.1 of Form 10-Q filed with the Securities and Exchange Commission on November
11, 2008)10.21
    
    
    Cdn. $40 million Promissory Note in favour of Talisman Energy Canada due July 11, 2011 and convertible
at the option of Talisman Energy Canada into 12,779,552 common shares at Cdn. $3.13 per share
(Incorporated by reference to Exhibit 10.2 of Form 10-Q filed with the Securities and Exchange
Commission on November 11, 2008)10.22
    
    
    Fixed and Floating Charge Debenture of Ivanhoe Energy Inc. in favour of Talisman Energy Canada dated
July 11, 2008 in the principal sum of Cdn. $67.5 million (Incorporated by reference to Exhibit 10.3 of
Form 10-Q filed with the Securities and Exchange Commission on November 11, 2008)
  117




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##### Table of Contents



Exhibits10.23
    
    
    Pledge Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and Talisman Energy Canada
(Incorporated by reference to Exhibit 10.4 of Form 10-Q filed with the Securities and Exchange
Commission on November 11, 2008)10.24
    
    
    English translation of Specific Services Contract dated October 8, 2008 between Ivanhoe Energy Ecuador
Inc., Empresa Estatal de Petroleos del Ecuador, Petroecuador and Empresa Estatal de Exploracion y
Produccion de Petroleos del Ecuador, Petroproduccion10.25
    
    
    English translation of Contract Modification to the Specific Services Contract dated February 13, 2009
between Ivanhoe Energy Ecuador Inc., Empresa Estatal de Petroleos del Ecuador, Petroecuador and
Empresa Estatal de Exploracion y Produccion de Petroleos del Ecuador, Petroproduccion14.1
    
    
    Code of Business Conduct and Ethics as amended November 2, 2007 (Incorporated by reference to Exhibit
14.1 of Form 10-K filed with the Securities and Exchange Commission on March 17, 2008)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
  118




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SIGNATURES
  IVANHOE ENERGY INC.By:
    /s/ Robert M. FriedlandName:
    Robert M. FriedlandTitle:Dated:
    Chief Executive OfficerMarch 16, 2009  Signature
    
    Title
    
    Date/s/ ROBERT M. FRIEDLAND

Robert M. Friedland
    
    Executive Co-Chairman, President and Chief
Executive Officer
(Principal Executive Officer)
    
    March 16, 2009/s/ W. GORDON LANCASTER
    
    Chief Financial Officer
    
    March 16, 2009W. Gordon Lancaster
    
    (Principal Financial and Accounting Officer)/s/ A. ROBERT ABBOUD
    
    Independent Co-Chairman and Lead Director
    
    March 16, 2009A. Robert Abboud/s/ HOWARD R. BALLOCH
    
    Director
    
    March 16, 2009Howard Balloch/s/ ROBERT G. GRAHAM
    
    Director
    
    March 16, 2009Robert G. Graham/s/ ROBERT A. PIRRAGLIA
    
    Director
    
    March 16, 2009Robert A. Pirraglia/s/ BRIAN F. DOWNEY
    
    Director
    
    March 16, 2009Brian F. Downey/s/ PETER G. MEREDITH
    
    Director
    
    March 16, 2009Peter G. Meredith
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EXHIBIT INDEX
 Exhibit No.
    
    Description3.1
    
    
    Articles of Ivanhoe Energy Inc. as amended to May 3, 2007 (Incorporated by reference to Exhibit 3.1
of Form 10-K filed with the Securities and Exchange Commission on March 17, 2008)3.2
    
    
    Bylaws of Ivanhoe Energy Inc. as amended May 15, 2001 and further amended March 8, 2007 (Incorporated
by reference to Exhibit 3.2 of Form 10-K filed with the Securities and Exchange Commission on March
17, 2008)10.1
    
    
    Petroleum Contract for Kongnan Block, Dagang Oilfield of the Peoples Republic of China dated
September 8, 1997 between China National Petroleum Corporation and Pan-China Resources Ltd., as
amended June 11, 1999 (Incorporated by reference to Exhibit 3.15 of Form 20-F filed with the
Securities and Exchange Commission on February 28, 2000)10.2
    
    
    Master License Agreement Amendment No. 1 dated October 11, 2000 between Syntroleum Corporation and
Ivanhoe Energy Inc. (Incorporated by reference to Exhibit 10.18 of Form 10-K filed with the
Securities and Exchange Commission on March 16, 2001)10.3
    
    
    Petroleum Contract dated September 19, 2002 between China National Petroleum Corporation and
Pan-China Resources Ltd. for Zitong Block, Sichuan Basin of the Peoples Republic of China
(Incorporated by reference to Exhibit 10.12 of Form 10-K filed with the Securities and Exchange
Commission on March 19, 2003)10.4
    
    
    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 as amended May 3, 2007 (Incorporated by reference to
Exhibit 10.5 of Form 10-K filed with the Securities and Exchange Commission on March 17, 2008)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 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)10.11
    
    
    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)10.12
    
    
    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)10.13
    
    
    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)10.14
    
    
    Facility Agreement, dated September 14, 2007 between Pan-China Resources Ltd., Sunwing Energy Ltd.,
Sunwing Holding Corporation, Sunwing Zitong Energy Ltd., Standard Bank PLC and Standard Bank Asia
Limited (Incorporated by reference to Exhibit 10.15 of Form 10-Q filed with the Securities and
Exchange Commission on November 8, 2007)10.15
    
    
    Credit Agreement, dated October 30, 2006 between Ivanhoe Energy (USA) Inc. and LaSalle Bank N.A.
(Incorporated by reference to Exhibit 10.15 of Form 10-K filed with the Securities and Exchange
Commission on March 17, 2008)
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##### Table of Contents



Exhibit No.
    
    Description10.16
    
    
    Indemnification Agreements entered into during the first quarter of 2008 between Ivanhoe Energy Inc.
and its executive officers and directors (Incorporated by reference to Exhibit 10.16 of Form 10-K
filed with the Securities and Exchange Commission on March 17, 2008)10.17
    
    
    Employment Agreement, dated May 2, 2007 between Ivanhoe Energy Inc. and Michael Silverman
(Incorporated by reference to Exhibit 10.17 of Form 10-K filed with the Securities and Exchange
Commission on March 17, 2008)10.18
    
    
    Asset Transfer Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and Talisman Energy Canada
(Incorporated by reference to Exhibit 10.1 of Form 10-Q filed with the Securities and Exchange
Commission on August 11, 2008)10.19
    
    
    Back-In Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and Talisman Energy Canada
(Incorporated by reference to Exhibit 10.2 of Form 10-Q filed with the Securities and Exchange
Commission on August 11, 2008)10.20
    
    
    Cdn. $12.5 million Promissory Note in favour of Talisman Energy Canada due 31, 2008 (Incorporated by
reference to Exhibit 10.1 of Form 10-Q filed with the Securities and Exchange Commission on November
11, 2008)10.21
    
    
    Cdn. $40 million Promissory Note in favour of Talisman Energy Canada due July 11, 2011 and
convertible at the option of Talisman Energy Canada into 12,779,552 common shares at Cdn. $3.13 per
share (Incorporated by reference to Exhibit 10.2 of Form 10-Q filed with the Securities and Exchange
Commission on November 11, 2008)10.22
    
    
    Fixed and Floating Charge Debenture of Ivanhoe Energy Inc. in favour of Talisman Energy Canada dated
July 11, 2008 in the principal sum of Cdn. $67.5 million (Incorporated by reference to Exhibit 10.3
of Form 10-Q filed with the Securities and Exchange Commission on November 11, 2008)10.23
    
    
    Pledge Agreement dated July 11, 2008 between Ivanhoe Energy Inc. and Talisman Energy Canada
(Incorporated by reference to Exhibit 10.4 of Form 10-Q filed with the Securities and Exchange
Commission on November 11, 2008)10.24
    
    
    English translation of Specific Services Contract dated October 8, 2008 between Ivanhoe Energy
Ecuador Inc., Empresa Estatal de Petroleos del Ecuador, Petroecuador and Empresa Estatal de
Exploracion y Produccion de Petroleos del Ecuador, Petroproduccion10.25
    
    
    English translation of Contract Modification to the Specific Services Contract dated February 13,
2009 between Ivanhoe Energy Ecuador Inc., Empresa Estatal de Petroleos del Ecuador, Petroecuador and
Empresa Estatal de Exploracion y Produccion de Petroleos del Ecuador, Petroproduccion14.1
    
    
    Code of Business Conduct and Ethics amended November 2, 2007 (Incorporated by reference to Exhibit
14.1 of Form 10-K filed with the Securities and Exchange Commission on March 17, 2008)21.1
    
    
    Subsidiaries of Ivanhoe Energy Inc.23.1
    
    
    Consent of GLJ Petroleum Consultants Ltd., Petroleum Engineers23.2
    
    
    Consent of 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
  121