Ivanhoe Energy 2009 Second-Quarter Results and Operations Update



    VANCOUVER, Aug. 10 /CNW/ - Ivanhoe Energy Inc. (NASDAQ:   IVAN and TSX: IE)
will file its Quarterly Report on Form 10-Q today for the quarter ended June
30, 2009.

    
    Highlights of the Second Quarter

    -   US oil and gas operations sold for approximately $40 million (closed
        in July, 2009).

    -   Ivanhoe Energy Ecuador received authority to initiate operations on
        the Pungarayacu field in Ecuador.

    -   Engineering work continued on a Phase I, 20,000-barrel-per-day Heavy-
        to-Light (HTL) upgrading facility for the Tamarack project in Canada.
        Front End Engineering & Design (FEED) is planned for completion in
        the fourth quarter of 2009.

    -   Discussions and due diligence with potential strategic partners
        accelerated during the second quarter.

    -   Cash flow used in operations during the second quarter was
        $2.9 million, reduced from the $4.1 million used in the first quarter
        of 2009, mainly due to higher oil prices.

    -   Capital spending in the second quarter was $6.7 million, up from
        $5.2 million in the first quarter of 2009.

    Message from Robert Friedland,
    President and Chief Executive Officer of Ivanhoe Energy Inc.
    

    "Management is very pleased with our progress and with our current
position at this stage of the emerging global economic recovery. We have
consolidated and focused our energies on our core heavy-oil business and the
development of our two world-class heavy-oil assets: Tamarack in Canada and
Pungarayacu in Ecuador. Our HTL upgrading technology is ready for commercial
implementation. The initial engineering and design of a 20,000-barrel-per-day
HTL facility, being carried out by AMEC of London, England, is scheduled to be
completed by the end of this year. Recognition of the strategic value of HTL
in unlocking the value of heavy oil is growing rapidly. We are evaluating
various additional HTL opportunities around the world and we are actively
engaged in partnership discussions with numerous leading oil groups. The
proceeds from the recent sale of our US oil and gas operations has provided us
with added financial flexibility, giving us the time to select the appropriate
partners that will help us achieve our objectives."

    Sale of US oil and gas operations

    In July 2009, Ivanhoe Energy closed the sale of its US oil and gas
operations to Seneca South Midway LLC, a subsidiary of Seneca Resources
Corporation. Seneca Resources is the exploration and production segment of
National Fuel Gas Company (NYSE:   NFG). This sale is consistent with Ivanhoe
Energy's goal of focusing its financial and human resources on its HTL
heavy-oil projects.
    The sale included all of Ivanhoe Energy's oil and gas exploration and
production operations in the United States. As of June 2009, these assets
produced approximately 645 gross (595 net) barrels per day of oil in
California and Texas. The sale also included certain exploration acreage in
California.
    Key heavy-oil experts presently based in Ivanhoe Energy's US operations
have been redeployed to work on the company's Tamarack project in Canada or
the Pungarayacu project in Ecuador.
    The sale price paid by Seneca was $39.2 million. This price was net of
surplus working capital of approximately $1 million that was withdrawn by
Ivanhoe before closing, indicating an enterprise value of approximately $40
million.
    An amount of $37.2 million was paid in cash at closing and $2 million was
placed in a contractual escrow for one year. From total cash proceeds, a loan
owing to Bank of America of approximately $5 million was retired, and closing
fees were paid. The net cash proceeds of the sale, net of the escrow,
retirement of the bank loan and payment of closing expenses was approximately
$32 million, with an additional $2 million due to Ivanhoe from the escrow one
year from closing.

    Projects Update

    During the second quarter, Ivanhoe Energy Ecuador Inc. received authority
to assume control of Block 20 and initiate operations on the Pungarayacu
field. This followed the Ecuadorean government's issuance of a key
environmental licence to Ivanhoe Energy Ecuador. Ivanhoe Energy Ecuador is
finalizing the geotechnical work required for the initial drilling program and
has retained drilling contractors to carry out this work.
    Pungarayacu is considered by the Government of Ecuador to be the
country's largest known, single accumulation of hydrocarbon resource. The
Pungarayacu oil field, covering 250 square miles (647 square kilometres), was
discovered and partly delineated approximately 30 years ago by Petroecuador.
The field was found to include a substantial resource of heavy oil, but
development was held back due to the challenges associated with heavy-oil
production. Ivanhoe Energy's unique and patented HTL heavy-oil upgrading
process provides a solution to these challenges, enabling the field to be
developed and placed into production.
    The permits received by Ivanhoe Energy Ecuador cover the drilling of a
limited number of appraisal wells. These early wells, proposed to be drilled
before the end of 2009, will 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.
    Progress on the Tamarack project in Canada during the second quarter was
focused on supporting the engineering related to the integrated Phase I,
20,000-barrel-per-day HTL facility being carried out by AMEC in London, in
conjunction with the upstream engineering being carried out by AMEC-BDR in
Calgary.
    Ivanhoe Energy plans to have the Front End Engineering & Design completed
on the Tamarack Phase I HTL facility in the fourth quarter of 2009.

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

                       -------------------------------- ---------------------
                              Three Months Ended          Six Months Ended
                       -------------------------------- ---------------------
                         Jun. 30    Mar. 31    Jun. 30    Jun. 30    Jun. 30
                           2009       2009       2008       2009       2008
                       ---------- ---------- ---------- ---------- ----------
    Financial
    ---------
      Oil revenue -
       gross           $   6,009  $   5,733  $  11,746  $  11,742  $  22,635
      Total revenue -
       after derivative
       gain (loss)     $   4,838  $   5,816  $  (3,252) $  10,654  $   4,969
      Depletion and
       depreciation    $   5,242  $   5,274  $   5,794  $  10,516  $  12,000
      Capital
       investments     $   1,368  $   1,156  $   1,646  $   2,524  $   3,771
      Identifiable
       assets (at end
       of period)      $  54,417  $  59,165  $  72,530

    Operating
    ---------
    Net production
     (after royalties):
    Barrel of oil
     equivalent (BOE)    127,881    131,078    116,507    258,959    241,478
    BOE/day for
     the period            1,405      1,456      1,280      1,431      1,327


    Dagang
    ------
    

    The gross production rate at the Dagang Project in China at the end of
June 2009 was 1,681 gross barrels of oil per day from 39 wells, compared to
1,840 gross barrels of oil per day from 37 wells at the end of March 2009. Two
well stimulations were performed during the second quarter; the company
intends to continue this fracture program during the remainder of 2009 to
offset normal field decline.

    
    Zitong
    ------
    

    Two exploration-well locations were selected on the Zitong block acreage
in China during the second quarter and drilling is planned to commence in late
2009. Drilling, completion and evaluation of this prospect is expected to be
finalized in 2010.

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

                       -------------------------------- ---------------------
                              Three Months Ended          Six Months Ended
                       -------------------------------- ---------------------
                         Jun. 30    Mar. 31    Jun. 30    Jun. 30    Jun. 30
                           2009       2009       2008       2009       2008
                       ---------- ---------- ---------- ---------- ----------
    Financial
    ---------
      Net loss from
       continuing
       operations      $ (11,444) $ (11,577) $ (18,547) $ (23,021) $ (26,977)
      Net income (loss)
       from discontinued
       operations      $      66  $    (697) $  (3,184) $    (631) $  (3,298)
                       ---------- ---------- ---------- ---------- ----------
      Net loss and
       comprehensive
       loss            $ (11,378) $ (12,274) $ (21,731) $ (23,652) $ (30,275)
                       ---------- ---------- ---------- ---------- ----------
                       ---------- ---------- ---------- ---------- ----------

      Net income (loss)
       per share
      Loss from
       continuing
       operations, basic
       and diluted     $   (0.04) $   (0.04) $   (0.08) $   (0.08) $   (0.11)
      Income (loss)
       from discontinued
       operations, basic
       and diluted     $    0.00  $   (0.00) $   (0.01) $   (0.00) $   (0.01)
                       ---------- ---------- ---------- ---------- ----------
      Net loss per
       share, basic
       and diluted     $   (0.04) $   (0.04) $   (0.09) $   (0.08) $   (0.12)
                       ---------- ---------- ---------- ---------- ----------
                       ---------- ---------- ---------- ---------- ----------

      Net cash
       provided (used)
       by operating
       activities from
       continuing
       operations      $  (4,917) $  (4,880) $     726  $  (9,797) $   2,396
      Net cash
       provided (used)
       by operating
       activities from
       discontinued
       operations      $   2,031  $     792  $   1,900  $   2,823  $   3,247
                       ---------- ---------- ---------- ---------- ----------
      Net cash used
       in operating
       activities      $  (2,886) $  (4,088) $   2,626  $  (6,974) $   5,643
                       ---------- ---------- ---------- ---------- ----------
                       ---------- ---------- ---------- ---------- ----------

      Oil revenue -
       gross           $   6,009  $   5,733  $  11,746  $  11,742  $  22,635
      Total revenue -
       after derivative
       gain (loss)     $   4,844  $   5,824  $  (3,249) $  10,668  $   4,986

      Depletion and
       depreciation    $   6,045  $   5,955  $   6,431  $  12,000  $  13,340
      Capital
       investments     $   6,692  $   5,208  $   1,880  $  11,900  $   4,720
      Total assets (at
       end of period)  $ 323,063  $ 304,460  $ 235,157
      Cash and cash
       equivalents (at
       end of period)  $  16,135  $  27,709  $   8,732


    Summary of Second Quarter
    -------------------------
    

    Oil revenue in the second quarter of 2009 increased by 5% compared to the
previous quarter, reflecting higher benchmark crude oil prices.
    The company utilises costless collar derivatives in conjunction with its
banking arrangements in order to reduce cash flow volatility. During the
second quarter these derivatives provided realised gains of approximately
$76,000. Due to higher oil prices at the end of the second quarter compared
with the end of the first quarter, valuation of open positions on these
derivatives at the end of the second quarter declined and led to an unrealised
loss of approximately $1.2 million during the quarter. As a result total
revenue after derivative gains and losses declined approximately 17%.
    Cash flow used in operating activities was $2.9 million during the second
quarter, compared to $4.1 million in the previous quarter; capital investments
for the second quarter increased to $6.7 million, compared to $5.2 million in
the first quarter of 2009.

    Liquidity and Capital Resources

    Our operating activities used $2.9 million in cash for the first quarter
of 2009 and capital investments during the quarter were $6.7 million.
    Our cash and cash equivalents as at June 30, 2009, were $16.1 million.
However, in July, after the end of the quarter, we closed the sale of our US
operations, providing an additional $32 million in cash after repayment of a
bank loan, fees and a contractual escrow.
    Our two initial HTL heavy-oil projects will require significant capital
for full development. 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. The pace of development of our projects will be determined by
the progress we make with our strategic partnership discussions.

    This news release summarizes our 2009 second 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 June 30, 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 August 10, 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 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

Organization Profile

Ivanhoe Energy Inc.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890