Ivanhoe Energy 2009 First-quarter Results and Operations Update



    
    First quarter of 2009 was marked by significant progress - increased
    recoverable resource base in Canada, acceleration of appraisal program in
    Ecuador, success with new Feedstock Test Facility in Texas
    

    VANCOUVER, May 11 /CNW/ - Ivanhoe Energy Inc. (NASDAQ:   IVAN and TSX: IE)
will file its Quarterly Report on Form 10-Q today for the quarter ended March
31, 2009.

    
    First Quarter Highlights

    -   A new, independent evaluation of the oil sands resource at the
        Tamarack project in Alberta increased best-estimate contingent
        resources to 441 million barrels of recoverable oil, representing an
        81% increase over the comparable estimate announced when this asset
        was purchased in mid-2008. This new estimate would support a 50,000
        barrel-per-day HTL Heavy-to-Light heavy oil project for a period of
        30 years.

    -   Ivanhoe Energy Ecuador accelerated the proposed timetable for
        drilling the initial appraisal wells for the Pungarayacu project, and
        has completed and submitted the required Environmental Impact
        Assessment study.

    -   The new HTL Feedstock Test Facility (FTF) in San Antonio, Texas was
        commissioned. This was followed by a successful run of Athabasca
        bitumen, which confirmed earlier data and validated Ivanhoe Energy's
        operating assumptions and economic models for Tamarack in Canada and
        Pungarayacu in Ecuador.

    -   Engineering work by London-based AMEC is on track to deliver a Basic
        Engineering and Design Package (BEDP) for a Phase I, 20,000-barrel-
        per-day HTL facility for the Tamarack project in Canada in the third
        quarter of 2009.

    -   Discussions and due diligence with potential strategic partners were
        accelerated during the first quarter, with a focus on Asian national
        oil companies, as well as various investment groups.
    -   Production of oil and gas during the first quarter increased 8%
        compared with the last quarter of 2008. Lower benchmark oil prices
        reduced oil and gas revenues to $7.7 million for the first quarter,
        down 41% from the fourth quarter of 2008.
    -   Driven by lower oil prices, cash flow from operations during the
        first quarter was negative $4.1 million, compared with $9.7 million
        for the fourth quarter of 2008.
    -   Capital spending in the first quarter was $5.4 million, down from
        $8.7 million in the fourth quarter of 2008.
    -   Cash and cash equivalents at March 31, 2009, totalled $28.4 million.
    

    Tamarack Project - Canada

    During the first quarter of 2009, Ivanhoe Energy announced that a new
evaluation by independent engineers has estimated that Ivanhoe Energy's
Tamarack Project, in the Athabasca region of Western Canada, contains
best-estimate contingent resources of 441 million barrels of bitumen. This
represents an increase of 81% over the best estimate announced in conjunction
with the purchase of this asset in mid-2008. The new estimate would support a
project with an estimated capacity of approximately 50,000 barrels per day for
30 years.
    At the time of the mid-2008 purchase of Lease 10 from Talisman Energy
Canada, Ivanhoe Energy reported that independent reservoir engineers engaged
by Talisman had estimated that Lease 10 contained best-estimate contingent
resources of approximately 244 million barrels of bitumen, with low and high
estimates of approximately 188 million and 313 million barrels, respectively.
    The new Tamarack evaluation was carried out by GLJ Petroleum Consultants
Ltd. (GLJ), independent reservoir engineers. This GLJ report follows
significant analysis carried out by Ivanhoe Energy since the mid-2008
acquisition, including a) detailed core descriptions completed by Norwest
Corporation; b) matching the petro-physical model to the core data; and c)
developing a detailed facies characterization and establishing field
performance based on analogue field data.
    In addition to the geological and reservoir analysis carried out to
support the new resource estimates, Ivanhoe Energy's Calgary-based heavy oil
team, working with AMEC BDR, completed the upstream Design Basis Memorandum
(DBM) during the first quarter and progressed a number of studies related to
final delineation drilling, upgraded product marketing, infrastructure and
transport logistics.
    The Tamarack project is on track for final delineation drilling and the
filing of regulatory approvals in mid-2010.

    Pungarayacu Project - Ecuador

    The first quarter of 2009 was the first full quarter of activity on the
Pungarayacu project following the signing of the contract with Petroecuador
and Petroproduccion in October, 2008. During the first quarter of 2009,
Ivanhoe Energy Ecuador accelerated the detailed geological analysis of
existing data on Block 20 to develop the near-term development plans. This
analysis provided Ivanhoe Energy Ecuador with additional confidence in the
potential for Block 20 and led to the formulation of a development plan that
includes an accelerated schedule for the drilling of a limited number of
appraisal wells. These early wells, proposed to be drilled before new seismic
acquisition and before the end of 2009, would help to more fully characterize
the oil and the reservoir in what Ivanhoe Energy Ecuador believes to be the
more prospective regions of the massive 426-square-mile Block 20.
    To carry out this early drilling campaign, Ivanhoe Energy Ecuador has
completed an Environmental Impact Assessment (EIA) study and has submitted
this study to the Ministry of the Environment for its review and approval. As
part of this process, Ivanhoe Energy Ecuador also consulted with the
indigenous and other local communities within Block 20 that will be affected
by drilling activity. Ivanhoe Energy Ecuador expects to finalize the approval
process for this early drilling program by mid-2009, with drilling and testing
to follow during the second half of 2009.

    HTL Technology Group

    During the first quarter of 2009, Ivanhoe Energy's Houston-based
technology group commissioned the company's new Feedstock Test Facility (FTF)
and followed this with a successful run of Athabasca bitumen.
    The FTF is located at Southwest Research Institute (SwRI) in San Antonio,
Texas. SwRI is a world-class technology center that operates testing
facilities for numerous leading oil companies, as well as other
technology-intensive organizations, such as NASA, the US Department of Energy
and the US Department of Defence. The FTF has supplanted the CDF in
Bakersfield, California, as Ivanhoe Energy's principal testing ground for its
proprietary HTL heavy-to-light-oil technology.
    The FTF is a state-of-the-art, multi-purpose HTL testing facility that is
being used for three primary purposes. Firstly, the FTF is supporting the
engineering and design of commercial HTL facilities for the Tamarack Project
in Canada and the Pungarayacu Project in Ecuador. Secondly, the FTF will test
heavy oil from other target projects around the world that are under
evaluation. Thirdly, the FTF will generate representative commercial-grade
product for marketing discussions.
    The data generated in the Athabasca bitumen FTF tests, which were run in
operating modes closely aligned with target project operations, have very good
correlation with the extensive data generated in Ivanhoe Energy's Commercial
Demonstration Facility (CDF) in Bakersfield, California, as well as in
previous test units. These correlations include liquid yields, coke yield,
viscosity destruction and reduction of acidity, sulphur and metals.
    The significance of the Athabasca bitumen test is that it provided
additional validation of the Company's operating assumptions underlying the
economic models for the Tamarack Project in Canada and the Pungarayacu Project
in Ecuador. In addition, these tests provided significant, hard engineering
data and support for our engineers and AMEC, our Tier-1 contractor, as we work
toward completion of the basic engineering designs for commercial facilities.
    AMEC is a major international engineering firm based in London, UK, with
operations worldwide. It has revenues of more than (pnds stlg)2.6 billion
(approximately US$4 billion) and employs more than 22,000 people. AMEC, which
has extensive experience in refineries and oil and gas processing, is
completing a basic engineering design package for Ivanhoe Energy's Tamarack
integrated oil sands project in Alberta, Canada.
    Another important event announced during the first quarter related to
Ivanhoe Energy's technology partner, Ensyn Corporation (Ensyn). In March,
Honeywell (NYSE:  HON) announced the creation of a joint venture between Ensyn
and UOP LLC (UOP), a Honeywell company and recognized leader in refining
process technologies. The new joint venture, Envergent Technologies LLC, will
offer Ensyn's commercially-proven Rapid Thermal Processing (RTP(TM))
technology to convert second-generation biomass, such as forest and
agricultural residuals, into pyrolysis oil for use in power and heating
applications. The joint venture also will accelerate research and development
efforts to commercialize next-generation technology to refine the pyrolysis
oil into transport fuels, such as green gasoline, green diesel and green jet
fuel.
    Ensyn's RTP(TM) technology was proven and commercialized in the 1980s in
the biomass sector and adapted in the late 1990s for heavy-oil upgrading. The
rights to the RTP technology for all applications except renewable resources
were acquired by Ivanhoe Energy in April, 2005, and rebranded HTL(TM) for
heavy-oil upgrading applications. Ensyn retained the rights to the RTP
technology for the processing of renewable resources.
    All improvements to the core RTP technology that are owned by Ensyn flow
through to Ivanhoe Energy for HTL heavy oil applications on a cost-free basis.

    Strategic Discussions

    Ivanhoe Energy is engaged in numerous discussions and due diligence
efforts with potential strategic partners related to the financing and
development of Ivanhoe Energy's two initial HTL projects, Tamarack in Canada
and Pungarayacu in Ecuador. These activities were accelerated during the first
quarter of 2009. Ivanhoe Energy's intention is to finalize one or more of
these initiatives by the end of 2009, in conjunction with the expected
acceleration in project development activities.

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

                                            ---------------------------------
                                                    Three Months Ended
                                            ---------------------------------
                                               Mar. 31    Dec. 31    Mar. 31
                                                  2009       2008       2008
                                            ----------- ---------- ----------

    Financial
    ---------
      Oil and gas revenue - gross            $   1,966  $   2,208  $   4,155
      Total revenue - after derivative
       gain (loss)                           $   2,154  $   5,618  $   2,935
      Depletion and depreciation             $   1,713  $   1,329  $   1,456
      Capital investments                    $     298  $     745  $   2,483
      Identifiable assets (at end of period) $  36,141  $  37,480  $  40,527

      Operating
      ---------
      Net production (after royalties):
      Barrel of oil equivalent (BOE)            57,499     48,546     48,601
      BOE/day for the period                       639        528        534



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

    We have 66 producing wells in the 1,400-acre South Midway heavy-oil field
in California, with a working interest of 100%. This field, which makes up the
majority of our U.S. production, currently is producing approximately 650
gross barrels of oil per day.



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

                                            ---------------------------------
                                                    Three Months Ended
                                            ---------------------------------
                                               Mar. 31    Dec. 31    Mar. 31
                                                  2009       2008       2008
                                            ----------- ---------- ----------
    Financial
    ---------
      Oil and gas revenue - gross            $   5,733  $  10,823  $  10,888
      Total revenue - after derivative
       gain (loss)                           $   5,816  $  19,318  $   8,220
      Depletion and depreciation             $   5,274  $   5,244  $   6,206
      Capital investments                    $   1,156  $   2,812  $   2,125
      Identifiable assets (at end of period) $  59,165  $  64,901  $  70,725

      Operating
      ---------
      Net production (after royalties):
      Barrel of oil equivalent (BOE)           131,078    125,710    124,971
      BOE/day for the period                     1,456      1,366      1,373



    Dagang
    ------

    The gross production rate at the end of March 2009 at the Dagang project
was 1,840 gross barrels of oil per day from 37 wells. Three well stimulations
were performed during the quarter and we intend to continue with this fracture
program during the remainder of 2009.

    Zitong
    ------
    

    The Zitong Partners relinquished 25% of the Zitong block acreage as
required by the contract to enter the Phase 2 exploration program. The Company
reprocessed the existing seismic in 2008 and the results assisted in
identifying several potential exploration targets during the first quarter.
Locations for two exploration wells will be selected in the second quarter.
Plans are to commence drilling late in 2009.

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

                                            ---------------------------------
                                                    Three Months Ended
                                            ---------------------------------
                                               Mar. 31    Dec. 31    Mar. 31
                                                  2009       2008       2008
                                            ----------- ---------- ----------
    Financial
    ---------
      Net loss and comprehensive loss        $ (12,274) $ (13,980) $  (8,544)
      Net loss per share - basic and
       diluted                               $   (0.04) $   (0.05) $   (0.03)
      Cash flow provided (used) by
       operating activities                  $  (4,088) $   9,654  $   3,017
      Oil and gas revenue - gross            $   7,699  $  13,031  $  15,043
      Total revenue - after derivative
       gain (loss)                           $   7,980  $  25,143  $  11,169
      Depletion and depreciation             $   7,632  $   7,226  $   8,366
      Capital investments                    $   5,452  $   8,734  $   5,323
      Total assets (at end of period)        $ 304,460  $ 317,275  $ 231,076
      Cash and cash equivalents (at
       end of period)                        $  28,364  $  39,265  $   6,691

    Operating
    ---------
      Net production (after royalties):
      Barrel of oil equivalent (BOE)           188,577    174,256    173,572
      BOE/day for the period                     2,095      1,894      1,907



    Summary of First Quarter
    ------------------------
    

    Oil and gas revenue in the first quarter of 2009 fell 41% compared to the
previous quarter, reflecting lower benchmark crude prices. Cash flow from
operating activities was negative $4.1 million during the first quarter,
compared with positive $9.7 million in the previous quarter, while capital
investments for the quarter declined to $5.5 million compared with $8.7
million in the fourth quarter of 2008.

    Liquidity and Capital Resources

    Our operating activities generated negative $4.1 million in cash for the
first quarter of 2009 and capital investments during the quarter were $5.5
million.
    Our cash and cash equivalents at March 31, 2009 totalled $28.4 million.
    Our two initial HTL projects will require significant capital for full
development. These capital requirements will be relatively low during the
second quarter, but will increase during the third and fourth quarters of 2009
and into 2010. Our strategy is to finance the development of these two
projects primarily with funding from strategic partners. As discussed
elsewhere in this release, we are engaged in various discussions and due
diligence efforts related to the establishment of strategic and financing
arrangements.
    In the interim, we intend to utilize revenue from our US and China
operations to fund our transition to a heavy-oil exploration, development and
production company and non-heavy-oil-related investments in our portfolio will
be leveraged and/or monetized as required.

    This news release summarizes our 2009 first quarter results of operations
and financial condition and should be read in conjunction with our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2009, which contains
financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations. The Form 10-Q is expected to be filed on
May 11, 2009 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 Canada, Ecuador, 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 in the Annual
Report on Form 10-K 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
rather than in accordance with the requirements of Form 51-101F1. Reports on
Form 51-101F2 and Form 51-101F3 will be filed in Canada concurrently with the
Annual Report on Form 10-K and copies may be obtained at www.sedar.com.
    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: Investors Contact: Ian Barnett, (416) 792-3308;
Bill Trenaman, (604) 688-8323; Media Contact: Bob Williamson, (604) 331-9880;
Website: www.ivanhoeenergy.com

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