Ivanhoe Energy 2006 Fourth Quarter Results and Update on Operations



    VANCOUVER, March 14 /CNW/ - Ivanhoe Energy Inc. (NASDAQ:   IVAN and
TSX: IE) announces summary financial results for the fourth quarter of 2006
and will file its Annual Report on Form 10-K for the year ended December 31,
2006 on Friday, March 16, 2007.

    Highlights

    We made a number of advancements this past quarter as we move towards our
 goal of building a heavy oil development and production company based on our
proprietary HTL heavy oil upgrading technology.

    
    -   The full year 2006 marks our third consecutive year of positive cash
        flow from operating activities. This cash, generated by our existing
        operations, was largely used to fund the growth of our HTL business.
    -   In the fourth quarter, we appointed LaSalle Bank N.A., who along with
        their parent, ABN AMRO Incorporated, will act as our lead corporate
        bank to support our technology implementation activities worldwide.
    -   We continued to advance the development of our HTL technology by
        performing successful testing at our Commercial Demonstration
        Facility (CDF) in California, expanding the HTL patent coverage and
        advancing the development of new commercial HTL configurations.
    -   Our internal capabilities were supplemented through the addition of
        Dr. Robert Graham, HTL co-inventor, to Ivanhoe Energy's core
        technical team full-time on an interim basis.
    

    HTL Technology Development Activities

    Our HTL technology development achievements were primarily related to
advancing CDF test operations, demonstrating new commercial HTL
configurations, expanding patent coverage and adding capability to our HTL
technical team.
    Following a multi-month program of enhancements to the HTL heavy oil
upgrading CDF in California, we announced a successful test run in early
February. The stability of the run exceeded our expectations and confirmed
modifications completed over recent months. The run also generated data
regarding our new processing configuration.
    This was followed by a second successful test run in late February. The
second run was 31 hours, the longest to date, and processed California vacuum
tower bottoms (VTBs), the heaviest component of California heavy oil,
primarily in the High Yield configuration. This run was concluded in a
mechanical High Quality recycle mode, with a controlled shutdown.
    A "High Quality" product has been produced at the CDF using an innovative
operating method based on a simple, once-through configuration. This novel
operating mode represents an additional processing option for Ivanhoe Energy
and significantly extends the flexibility of the HTL technology. Operated on
its own, the new configuration, compared with other High Quality processing
configurations, will allow for the production of a higher quality product
together with higher amounts of by-product energy, offset by slightly lower
liquid volume yields. Operated in conjunction with other configurations, this
new process allows us to better tailor HTL plant design configurations to
market opportunities. In addition to our current patent protection and new
patent claims that have been applied for, a patent application has been filed
for this new process design.
    Test work will continue with extended runs, the High Quality
configuration, and additional work related to the recent development of new
commercial configurations matched to specific commercial opportunities.
    In January 2007 we received a Notice of Allowance from the U.S. Patent
Office for the first of a family of additional petroleum upgrading patent
applications. Since we acquired the patented heavy oil upgrading technology we
have been working to expand patent coverage to protect innovations to the HTL
Technology as they are developed. This allowance is the first that has been
granted directly to Ivanhoe Energy, and significantly broadens our portfolio
of HTL intellectual property for petroleum upgrading and opens up additional
HTL patenting opportunities.
    Dr. Robert Graham, the co-inventor of the original Rapid Thermal Process
(RTP(TM)), which forms the basis for Ivanhoe Energy's HTL heavy oil upgrading
technology will join Ivanhoe Energy's core technical team as Chief Technology
Officer full-time on an interim basis. Dr. Graham is stepping down as
President and CEO of Ensyn Corporation, in order to assume this new role with
Ivanhoe Energy. Dr. Graham will initially be located in Bakersfield and will
work exclusively on HTL technology development, including the
recently-announced potential innovations to the technology.

    
    U.S. Oil and Gas Operations
    (unaudited; thousands of U.S. dollars except per share and
     production amounts)


                       -------------------------------- ---------------------
                               Three Months Ended             Year Ended
                       -------------------------------- ---------------------
                         Dec. 31   Sept. 30    Dec. 31    Dec. 31    Dec. 31
                          2006       2006       2005       2006       2005
                       ---------- ---------- ---------- ---------- ----------

    Financial
    ---------
    Revenue            $   2,213  $   3,442  $   3,581  $  11,780  $  14,099
    Depletion and
     depreciation      $   1,472  $   1,445  $   1,271  $   5,378  $   5,039
    Capital
     investments       $     568  $   2,929  $   1,205  $   5,550  $   6,514
    Identifiable
     assets (at end
     of period)        $  42,158  $  43,296  $  48,070

    Operating
    ---------
    Net production
     (after royalties):
      Barrel of oil
       equivalent (BOE)   53,274     57,058     69,695    219,930    319,674
      BOE/day for the
       period                579        627        758        603        876
    

    South Midway
    ------------

    We have 67 wells in the 1,400-acre South Midway heavy oil field in
California, with a working interest of 100%. Production has steadily increased
from the ten new wells drilled in the third quarter of 2006. This field, which
makes up the majority of our U.S. production, is currently producing
approximately 600 barrels-per-day. We intend to drill eight additional wells
in this field in 2007.

    Knights Landing
    ---------------

    The principal reason for the year-over-year decline in U.S. production
was the decline in production from the Knights Landing field in California's
Sacramento Basin. We have completed an extensive seismic program, identified a
number of potential drilling locations and plan to resume production from this
project through the drilling of four wells in the second half of 2007.

    Other U.S. Activities
    ---------------------

    Final testing of the 13,000-foot North Yowlumne exploration well, which
began drilling in December 2005, is complete. The well did not produce
commercial quantities of hydrocarbons during several tests and has been
suspended by the operator. In a further move to sharpen our focus on the HTL
technology, we have sold our 56.25% interest in this 6,900-acre prospect for
US$1 million, retaining a 15% carried interest in any future commercial
discovery.

    
    China Oil and Gas Operations
    (unaudited; thousands of U.S. dollars except per share and
     production amounts)

                       -------------------------------- ---------------------
                               Three Months Ended             Year Ended
                       -------------------------------- ---------------------
                         Dec. 31   Sept. 30    Dec. 31    Dec. 31    Dec. 31
                          2006       2006       2005       2006       2005
                       ---------- ---------- ---------- ---------- ----------

    Financial
    ---------
    Revenue            $   8,774  $  10,376  $   5,039  $  35,746  $  15,738
    Depletion and
     depreciation      $   5,772  $   5,910  $   3,921  $  23,345  $   9,378
    Capital
     investments       $   2,794  $   1,630  $   6,610  $   9,086  $  30,730
    Identifiable
     assets (at end
     of period)        $  72,970  $  84,036  $  65,020

    Operating
    ---------
    Net production
     (after royalties):
      Barrel of oil
       equivalent (BOE)  143,282    152,767     89,563    575,131    314,818
      BOE/day for the
       period              1,557      1,679        973      1,576        863
    

    Dagang
    ------

    The gross production rate at the end of 2006 at the Dagang project was
1,877 barrels of oil per day, from 41 wells, compared to 2,148 barrels per day
at the end of the third quarter of 2006. In the fourth quarter of 2006, we
reached agreement with China National Petroleum Corporation (CNPC) to reduce
the overall scope of the Dagang development to approximately 44 wells. In
addition, we relinquished two of the six blocks that were part of the original
development plan. We expect to commence drilling the final five wells in the
second quarter of 2007 and will continue with our fracture stimulation program
in order to maximize production from this field.

    Zitong
    ------

    Drilling is continuing at the second exploratory well on the Zitong
natural gas exploration block, Yixin No.1, which was spudded on October 23,
2006. Results of the well are expected in the second quarter of 2007.
    After the drilling of the Yixin No.1 well, we will evaluate the results
and make an election, along with our partner Mitsubishi Gas Chemical Company
Inc., whether to enter into the next three-year exploration phase. We have a
90% working interest in this project and are the operator.

    
    Consolidated Financial Highlights
    (unaudited; thousands of U.S. dollars except per share and
     production amounts)

                       -------------------------------- ---------------------
                               Three Months Ended             Year Ended
                       -------------------------------- ---------------------
                         Dec. 31   Sept. 30    Dec. 31    Dec. 31    Dec. 31
                          2006       2006       2005       2006       2005
                       ---------- ---------- ---------- ---------- ----------
    Financial
    ---------
    Net loss           $ (11,323) $  (4,388) $  (8,885) $ (25,492) $ (13,512)
    Net loss per share
     - basic and
     diluted           $   (0.05) $   (0.02) $   (0.04) $   (0.11) $   (0.07)
    Cash flow from
     operating
     activities        $   3,007  $   5,643  $   4,233  $  14,352  $   9,870
    Revenue            $  11,137  $  14,015  $   8,651  $  48,100  $  29,939
    Depletion and
     depreciation      $   7,742  $   7,772  $   5,197  $  32,550  $  14,447
    Capital
     investments       $   4,220  $   5,019  $   9,198  $  17,842  $  43,282
    Total assets
     (at end of
     period)           $ 248,544  $ 264,242  $ 240,877
    Cash and cash
     equivalents
     (at end of
     period)           $  13,879  $  19,535  $   6,724

    Operating
    ---------
    Net production
     (after royalties):
      Barrel of oil
       equivalent (BOE)  196,556    209,825    159,258    795,061    634,492
      BOE/day for the
       period              2,136      2,306      1,731      2,178      1,738
    

    Summary of Fourth Quarter
    -------------------------

    Cash flow from operating activities remained positive for the ninth
consecutive quarter, generating US$3.0 million, with capital investments for
the quarter at US$4.2 million. Revenue fell 21% from the third quarter of 2006
as benchmark crude prices fell 30% from their high in the third quarter of
2006 to fourth quarter lows. Our loss widened from the third quarter primarily
due to a non-cash impairment of our China oil and gas properties of
$4.7 million and increased business and technology development expenses as we
continue our focus on the deployment of our HTL Technology. Revenue was up 29%
from the same quarter a year earlier on higher prices and production, but was
more than offset by higher depletion and depreciation expense.

    Summary of Full Year 2006
    -------------------------

    Cash flow from operating activities increased 45% in 2006, generating
US$14.4 million for the year. Capital investments for 2006 were US$17.8
million. Revenue rose by 61%, or $18.2 million due to continued high oil
prices and increased production; however this gain was offset by an increase
in non-cash depletion and depreciation expense of $18.1 million. In addition
we incurred increased business and technology development and general and
administrative expenses and a non-cash impairment of our China oil and gas
properties of $5.4 million, resulting in a loss of $25.5 million for the year.

    Liquidity and Capital Resources

    On December 31, 2006, our cash position was US$13.9 million. Our
operating activities provided US$3.0 million in cash for the fourth quarter of
2006 and US$14.4 million for the full year 2006. Capital investments for the
fourth quarter of 2006 were US$4.2 million and for the full year 2006 were
US$17.8 million. Based on our current plans, we estimate that we will need
approximately $20 to $25 million to fund our capital investment programs for
2007, which significantly emphasizes the development of the HTL technology.
    Our Annual Report on Form 10-K includes an audit report on our
consolidated financial statements from our Independent Registered Chartered
Accountants, Deloitte & Touche LLP, which expresses an unqualified opinion and
in addition, includes a separate report titled "Comments by Independent
Registered Chartered Accountants on Canada - United States of America
Reporting Differences" referring to our ability to continue as a going
concern. We will require additional funding and management's plans to fund its
activities include alliances or other arrangements with entities with the
resources to support our projects as well as project financing, debt and
mezzanine financing or the sale of equity securities in order to generate
sufficient resources to assure continuation of our operations and achieve our
capital investment objectives. We intend to utilize revenue from existing
operations to fund our transition to a heavy oil exploration, production and
upgrading company and non-heavy oil related investments in our portfolio will
be leveraged or monetized to capture value and provide maximum return.

    Conference Call

    Ivanhoe Energy will host a conference call today, March 14, 2007, for
investors and analysts at 4:30 p.m. EDT (1:30 p.m. PDT) to discuss recent
announcements, 2006 fourth quarter results and provide an update on
operations. The conference call may be accessed by dialing 1-866-540-8136 in
Canada and the United States, or 1-416-340-8010 in the Toronto area and
internationally. A simultaneous webcast of the conference call will be
provided through www.ivanhoeenergy.com and www.newswire.ca/webcast. If you are
unable to participate in the call it will be archived for later playback by
dialing 1-416-695-5800 and entering the pass code 3215469 followed by the
number sign, or via www.ivanhoeenergy.com. The archived playback will be
available until April 14, 2007.

    This news release summarizes our 2006 fourth quarter results of
operations and financial condition and should be read in conjunction with our
Annual Report on Form 10-K for the year ended December 31, 2006, which
contains condensed financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations. The Form 10-K is
expected to be filed on March 16, 2007 and copies may be obtained from the
Ivanhoe Energy website at www.ivanhoeenergy.com, on EDGAR at www.sec.gov or
SEDAR at www.sedar.com.

    Ivanhoe Energy is an independent international heavy oil development and
production company focused on pursuing long-term growth in its reserves and
production using advanced technologies, including its proprietary heavy oil
upgrading process (HTL). Core operations are in the United States and China,
with business development opportunities worldwide. Ivanhoe Energy trades on
the NASDAQ Capital Market with the ticker symbol IVAN and on the Toronto Stock
Exchange with the symbol IE.

    FORWARD-LOOKING STATEMENTS: This document includes forward-looking
statements, including forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
include, but are not limited to, statements concerning the potential benefits
of Ivanhoe Energy's heavy oil upgrading technology, the potential for
commercialization and future application of the heavy oil upgrading technology
and other technologies, statements relating to the continued advancement of
Ivanhoe Energy's projects, the potential for successful exploration and
development drilling, dependence on new product development and associated
costs, statements relating to anticipated capital expenditures, the necessity
to seek additional funding, statements relating to increases in production and
other statements which are not historical facts. When used in this document,
the words such as "could," "plan," "estimate," "expect," "intend," "may,"
"potential," "should," and similar expressions relating to matters that are
not historical facts are forward-looking statements. Although Ivanhoe Energy
believes that its expectations reflected in these forward-looking statements
are reasonable, such statements involve risks and uncertainties and no
assurance can be given that actual results will be consistent with these
forward-looking statements. Important factors that could cause actual results
to differ from these forward-looking statements include the potential that the
company's projects will experience technological and mechanical problems, new
product development will not proceed as planned, the HTL technology to upgrade
bitumen and heavy oil may not be commercially viable, geological conditions in
reservoirs may not result in commercial levels of oil and gas production, the
availability of drilling rigs and other support services, uncertainties about
the estimates of reserves, the risk associated with doing business in foreign
countries, environmental risks, changes in product prices, our ability to
raise capital as and when required, competition and other risks disclosed in
Ivanhoe Energy's Annual Report on Form 10-K filed with the U.S. Securities and
Exchange Commission on EDGAR and the Canadian Securities Commissions on SEDAR.

    RESERVES DATA AND OTHER OIL AND GAS INFORMATION: Ivanhoe Energy's
disclosure of reserves data and other oil and gas information is made in
reliance on an exemption granted to Ivanhoe Energy by Canadian securities
regulatory authorities, which permits Ivanhoe Energy to provide disclosure in
accordance with U.S. disclosure requirements.

    The information provided by Ivanhoe Energy may differ from the
corresponding information prepared in accordance with Canadian disclosure
standards under National Instrument 51-101 (NI 51-101). Further information
about the differences between the U.S. requirements and the NI 51-101
requirements is set forth under the heading "Reserves, Production and Related
Information" in Ivanhoe Energy's Annual Report on Form 10-K.




For further information:

For further information: Cindy Burnett, (604) 331-9830; Website:
www.ivanhoeenergy.com

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