VANCOUVER, May 12 /CNW/ -- VANCOUVER, May 12 /CNW/ - Ivanhoe Energy Inc. (NASDAQ: IVAN and TSX: IE) will today file its Quarterly Report on Form 10-Q for the quarter ended March 31, 2008.
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Highlights
- Preparations for full-scale commercial deployment of HTL(TM) were
significantly accelerated in the first quarter of 2008
- On March 17, 2008, two major announcements were made:
- a corporate restructuring was initiated in preparation for
multiple HTL opportunities in Canada, Latin America, Middle East
and North Africa, and China, and
- Robert Friedland is proposed to become the new Executive Chairman
and CEO of Ivanhoe Energy as of May 29 2008.
- Commercial discussions for HTL heavy oil projects were advanced in
Canada, Latin America and the Middle East and North Africa.
- Cash flow from operating activities during the first quarter
increased to just over US$3 million in the first quarter from US
$923,000 in the fourth quarter of 2007, driven by higher oil prices
and supported by stable oil production.
- Operating cash flow was dedicated primarily to supporting our HTL
heavy oil development activities.
- Conference call to update shareholders will be held on June 2, 2008,
after the company's Annual General Meeting on May 29, 2008.
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Corporate Restructuring & Leadership Changes
On March 17, 2008, it was announced that Robert Friedland would be assuming the leadership of Ivanhoe Energy Inc. after the company's Annual General Meeting on May 29, 2008, and will serve as Executive Chairman and Chief Executive Officer to guide the company through a major corporate and management restructuring in preparation for the implementation of multiple, full-scale, commercial HTL heavy-oil projects in Canada and internationally.
The restructuring is planned to enhance Ivanhoe Energy's pursuit of its central mission to develop heavy-oil assets using its proprietary, HTL (Heavy-to-Light) oil-upgrading technology.
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Principal Entities
The restructuring will consolidate activities within the following
principal entities:
1) Ivanhoe Energy Inc. (TSX: IE, NASDAQ: IVAN) will focus on the
Athabasca oil sands of Western Canada, as well as the United States
and other areas not addressed by its subsidiaries. It will pursue
joint ventures with heavy-oil asset owners and the outright
acquisition of heavy-oil assets. This company will hold and manage
the core HTL technology and intellectual property. The Company's HTL
technology team, headed by Dr. Mike Silverman (formerly VP
Petrochemicals at KBR Inc), will be based in Houston. Ivanhoe Energy
also will include Ivanhoe's existing US conventional oil and gas
activities. Management will be led by Mr. Friedland (Executive
Chairman and CEO), Gord Lancaster (CFO), Mike Silverman (CTO and
EVP), Ian Barnett (EVP, Corporate Development & Finance) and Ed Veith
(EVP, Upstream).
2) Sunwing Energy Ltd., Ivanhoe's wholly owned company with existing
conventional oil and gas operations in China will continue to focus
on opportunities in China and Southeast Asia. Sunwing's management
will continue to be led by Co-Chairmen Robert Friedland and Patrick
Chua, and President Gerry Moench.
3) Ivanhoe Energy Latin America will focus on HTL heavy-oil
opportunities in Latin America. Management will be led by David
Martin as Chairman and CEO, and is expected to include selected
Ivanhoe Energy personnel currently based in Bakersfield, California,
who have extensive Latin American experience. Mr. Martin is currently
Executive Co-Chairman of Ivanhoe Energy Inc. Mr. Martin and Leon
Daniel, who is Deputy Chairman of Ivanhoe Energy Inc. and is expected
to be on the Board of Directors of this subsidiary, have more than 50
years of combined experience in negotiating and executing major oil
and gas projects in Latin America, primarily with Occidental
Petroleum. This includes the 1.2-billion-barrel Cano Limon field in
Colombia with the associated 500-km pipeline across the Andes, the
30,000-barrel-per-day Alturitas field in Venezuela, and various
projects in Ecuador and Peru.
4) Ivanhoe Energy Middle East and North Africa (MENA) will focus on HTL
opportunities in those regions. In addition, this company will
incorporate Ivanhoe Energy's Gas-to-Liquids (GTL) technology team and
GTL intellectual property, and will continue to advance the GTL
project in Egypt. Management will be led by Leon Daniel as Chairman
and CEO and is expected to include existing Ivanhoe personnel based
in London, England. Mr. Daniel is currently Deputy Chairman of
Ivanhoe Energy. Mr. Daniel and Mr. Martin, who is expected to be on
the Board of Directors of this company, have more than 50 years of
combined experience in negotiating and executing oil and gas projects
in the Middle East and North Africa, primarily while at Occidental
Petroleum. This includes the 100,000-barrel-per-day Idd El Shargi
North dome in Qatar, the giant 2.4-billion-barrel Intisar and Augila
Nafoora fields in Libya, and the 200,000-barrel-per-day Masila field
in Yemen.
Strategic discussions for Ivanhoe Energy Middle East and North Africa
have been initiated with investors based in several Middle Eastern
countries, and we have identified project potential across the region
including in Egypt, Libya, Iraq, Oman, Kuwait, Bahrain and Syria.
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This structure will allow the development and financing of multiple HTL projects around the world, while minimizing dilution to Ivanhoe Energy's existing shareholders. In addition, the alignment with principal energy-producing regions will facilitate financing from region-specific strategic investors, some of which already have been identified, and also will enhance flexibility in accessing global capital markets.
Mr. Friedland will focus his efforts on corporate restructuring, finance and the closing of commercial transactions. Mr. Friedland was the founding Chairman of Ivanhoe Energy and most recently has been serving as Deputy Chairman of Ivanhoe Energy and Co-Chairman of its China-focused subsidiary, Sunwing Energy.
Ivanhoe Energy's management and Board of Directors also are being restructured to more closely align management experience with the goals of the various business units. As part of this process, a number of directors will retire from the Ivanhoe Energy Board to assume directorships in the subsidiary companies. The number of directors on the Ivanhoe Energy Board is expected to be reduced from 12 to 7 members.
HTL technology rights
Ivanhoe Energy's patents and other intellectual property related to HTL heavy-oil upgrading, and the core HTL technology team led by Dr. Silverman, will remain with Ivanhoe Energy Inc. Agreements will be established between Ivanhoe Energy and the subsidiary companies for site licenses for HTL projects identified outside Canada and the US, and for HTL technology support.
Restructuring Schedule
A new Board of Directors for Ivanhoe Energy will be elected at the Annual General Meeting on May 29, 2008. It is expected that Mr. Friedland will assume responsibilities as Executive Chairman and CEO immediately following the meeting. The new entities for Latin America and the Middle East and North Africa have been established, and the necessary inter-company agreements covering technology and inter-company finances are being put into place.
HTL Business Update
The conclusion of the HTL technical testing period in the last half of 2007, together with the technical and economic data generated from that process, allowed Ivanhoe Energy's development teams to accelerate commercial discussions in the first quarter with heavy oil asset owners and potential strategic partners in Canada and internationally.
In Canada, the market for smaller oil sands assets - the key target market for Ivanhoe Energy - has changed noticeably, and for Ivanhoe positively, over the past nine months. There has been a widely publicized shift in investor sentiment for junior Canadian oil sands away from a business model based on land acquisition and resource delineation (the "acquire-delineate-flip" business model), and toward the ability to demonstrate profitable and financeable production capability. This has led to significant declines in the asset values of many junior oil sands companies, and an elevated interest by asset owners in considering production of their assets integrated with HTL upgrading. Ivanhoe Energy is currently in various discussions related to these opportunities in Western Canada.
Internationally, significant advancement has been made in HTL commercial deployment discussions in Latin America and in the Middle East and North Africa. In South America, there is a very significant belt of heavy oil that arches from Peru through Ecuador into Colombia and Venezuela, and Ivanhoe believes there are multiple opportunities to develop HTL projects in those areas.
In the Middle East and North Africa, Ivanhoe Energy's business development teams have identified numerous potential projects, and are also in discussions with potential strategic partners related to financing those projects.
An additional business update will be provided on the conference call on June 2, 2008. Details are provided below.
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U.S. Oil and Gas Operations
(unaudited; thousands of U.S. dollars except per share and
production amounts)
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Three Months Ended
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March 31 Dec. 31 March 31
2008 2007 2007
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Financial
Revenue $ 2,935 $ 563 $ 2,274
Depletion and depreciation $ 1,456 $ 1,482 $ 1,614
Capital investments $ 2,483 $ 614 $ 812
Identifiable assets (at end of period) $ 40,527 $ 40,726 $ 40,996
Operating
Net production (after royalties):
Barrel of oil equivalent (BOE) 48,601 48,611 56,845
BOE/day for the period 534 528 632
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South Midway
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We have 67 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, is currently producing approximately 600 barrels-per-day. In the first quarter of 2008, we drilled and completed eight development wells in South Midway. These wells are on production and are performing as planned. Based on these wells, we have identified additional development locations that will lead to continued expansion of the South Midway project.
Knights Landing
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We plan to drill four low-risk exploration wells at this natural gas field in the second half of 2008.
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China Oil and Gas Operations
(unaudited; thousands of U.S. dollars except per share and production
amounts)
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Three Months Ended
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March 31 Dec. 31 March 31
2008 2007 2007
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Financial
Revenue $ 8,220 $ 5,250 $ 6,896
Depletion and depreciation $ 6,206 $ 5,631 $ 4,726
Capital investments $ 2,125 $ 5,435 $ 3,802
Identifiable assets (at end of period) $ 70,725 $ 73,298 $ 70,883
Operating
Net production (after royalties):
Barrel of oil equivalent (BOE) 124,971 125,148 126,316
BOE/day for the period 1,373 1,360 1,403
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Dagang
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The gross production rate at the end of the first quarter of 2008 at the Dagang project was 1,661 barrels of oil per day, from an average of 42 wells on production, compared to 1,735 barrels per day at the end of 2007. With current high oil prices, the company is reviewing the potential for additional development drilling.
Zitong
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Effective January 1, 2008, the company entered into Phase II of the Zitong Exploration Contract. Activities for the calendar year 2008 will include a comprehensive review of the potential of deep prospects on the block, as well as selection of the drilling location for the next exploration well.
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Consolidated Financial Highlights
(unaudited; thousands of U.S. dollars except per share and
production amounts)
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Three Months Ended
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March 31 Dec. 31 March 31
2008 2007 2007
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Financial
Net loss and comprehensive loss $ (8,544) $ (18,849) $ (6,547)
Net loss per share - basic and diluted $ (0.03) $ (0.07) $ (0.03)
Cash flow from operating activities $ 3,017 $ 923 $ 2,594
Revenue $ 11,169 $ 5,848 $ 9,257
Depletion and depreciation $ 8,366 $ 7,564 $ 6,892
Capital investments $ 5,323 $ 9,081 $ 5,334
Total assets (at end of period) $ 231,076 $ 236,916 $ 241,474
Cash and cash equivalents (at end
of period) $ 6,691 $ 11,356 $ 10,793
Operating
Net production (after royalties):
Barrel of oil equivalent (BOE) 173,572 173,759 183,161
BOE/day for the period 1,907 1,889 2,035
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Summary of First Quarter
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Cash flow from operating activities remained positive for the fourteenth consecutive quarter, generating US$3.0 million. Our existing production in the U.S. and China continued to fund our business and technology development expenses associated with the planned deployment of our HTL technology. Our loss narrowed from the fourth quarter primarily due to stronger oil prices.
Liquidity and Capital Resources
On March 31, 2008, our cash position was US$6.7 million. Our operating activities provided US$3.0 million in cash for the first quarter of 2008. Capital investments for the first quarter of 2007 were US$5.3 million.
In April 2008, the company obtained a loan from a third party finance company in the amount of C$5.0 million bearing interest at 8% per annum. The principal and accrued and unpaid interest matures and is repayable in August 2008. The lender has the option to convert the outstanding balance, in whole or in part, into the company's common shares at a conversion price of Cdn.$2.24 per share.
Conference Call
Ivanhoe Energy will host a conference call on June 2, 2008, for investors and analysts at 4:30 p.m. EDT (1:30 p.m. PDT) to discuss 2008 first 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 3261239 followed by the number sign, or via www.ivanhoeenergy.com. The archived playback will be available until July 4, 2008.
This news release summarizes our 2008 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, 2008, which contains condensed financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations. The Form 10-Q is expected to be filed today 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(TM)). 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,", "believe", "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 corporate restructuring and leadership changes may not produce the desired results, 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.
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