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Press release from CNW Group

Ivanhoe Energy successfully reaches total depth at second Ecuador well and provides update on first well

Wednesday, July 07, 2010

Ivanhoe Energy successfully reaches total depth at second Ecuador well and provides update on first well08:30 EDT Wednesday, July 07, 2010Santiago Pastor appointed Vice President, Operations for Ivanhoe Energy EcuadorQUITO, ECUADOR, July 7 /CNW/ - David Dyck, President and Chief Operating Officer of Ivanhoe Energy Inc. (TSX: IE, NASDAQ: IVAN), and David Martin, President and Chief Executive Officer of Ivanhoe Energy Latin America, announced today that the company's second well, IP-5b, located in the Pungarayacu field on Block 20 in Ecuador has successfully reached total depth and logging activities have commenced.The company's operations in Ecuador are being led by Santiago Pastor, an important new addition to the Ivanhoe Energy Ecuador team. Mr. Pastor, newly appointed Vice President, Operations, joined the company from a senior position at Petrobras Ecuador.Strong oil shows encountered in T-Sand and Hollin Formations in IP-5b wellThe IP-5b well was successfully drilled and cored to a total depth of 1,080 feet (329 metres) and logging activities have commenced. Ivanhoe Energy will begin an extensive testing program following analysis of the core and log data.Strong oil shows were encountered in the shallower, T-Sand Formation at a depth of 538 feet as well as in the Hollin Formation starting at 750 feet."The oil and gas shows encountered in both formations were significantly stronger and the formation pressures higher than expected," Mr. Martin said."Our on-site geologists witnessed oil running out of the core barrel during examination of the first core. This second well is a major step forward in understanding the wide oil distribution in Block 20 and the Pungarayacu oil field. Data obtained from IP-5b will increase our understanding of the nature of the reservoir and the characteristics of the oil in the southern portion of this large block."The Hollin is the primary oil producing formation in Ecuador and throughout Block 20, and the T-Sand is a secondary formation which produces widely in the Oriente Basin in Ecuador.The IP-5b well is approximately 20 miles south of IP-15, Ivanhoe's first well drilled in the Pungarayacu field.Update on the initial IP-15 wellFollowing a successful coring and logging program at the IP-15 well, cores were sent to Core Labs in Bogota, Colombia for independent analysis. As reported in a news release on March 16, 2010, the preliminary reports on the core analysis indicated that the main target at this location, the Hollin sandstone formation, has excellent porosity (average 28%) and permeability (multi-Darcy), and is thick, clean sandstone with little clay content. Some of this information confirmed data that was generated from cores drilled by Petroecuador in the 1980s and some was valuable new data. Additional tests are being carried out on the cores from the IP-15 well to confirm these results and to further characterize the reservoir and the oil in terms of its viscosity and API gravity.Following the core analysis, Ivanhoe initiated steam tests to understand the production performance of the oil in the Hollin Formation using steam injection techniques. Test results were affected by unforeseen mechanical challenges encountered during the completion of the well. A leak in the well casing was discovered during steam tests impeding the ability to deliver the required amount of steam to the target in the Hollin Formation, and testing was suspended."Despite the unfortunate technical complication that impeded completion of steam testing, we learned a great deal from our first well," said Mr. Dyck. "We confirmed that the Hollin Formation in the northwest area of Block 20 has excellent reservoir characteristics, and we will use this data, and build on it, as we perform further appraisal drilling. We know this is a quality reservoir and that significant quantities of oil are present. Our key objective is to continue to characterize the reservoir and determine the best means to liberate the oil from the reservoir using a variety of well-established thermal techniques."Variations in Block 20 reservoir characteristicsBlock 20 consists of various large, segregated fault blocks. Ivanhoe Energy's first and second wells, one in the northeast and the other in the south, are in separate fault blocks. Ivanhoe Energy expects to encounter significant variations in reservoir characteristics between each block and, to date, the results of the second well, compared with the first well, confirm this expectation. The company believes this variation is a positive characteristic, providing the company with optionality as it carries out appraisal operations across the block, tailoring production methodologies to the requirements of each sub-block. A seismic program will be undertaken to delineate these important fault blocks.Ivanhoe Energy's primary goal during its three-year evaluation phase is to increase its understanding of the reservoir and to develop an optimal development program with the drilling of additional appraisal wells.Santiago Pastor appointed Vice-President, OperationsIvanhoe Energy Ecuador is pleased to announce that Santiago Pastor has been appointed as Vice-President, Operations, and has assumed responsibility for all of the company's operational activities in Ecuador.Prior to joining Ivanhoe, Mr. Pastor was Operations, Facilities and Construction Manager with Petrobras Ecuador, where he was responsible for the engineering, development and construction of two significant Ecuador oil fields, each producing more than 40,000 barrels per day."Santiago is a very well known and respected executive in the Ecuadorian petroleum industry and we look forward to his guidance and direction as we continue to increase our operational activities in Block 20," Mr. Martin said.Mr. Pastor spent the majority of his professional career with Perenco Energy Ecuador where he was Manager, Operations, with responsibility for the engineering and construction of new projects, including facilities, pipelines, electricity generation and water injection systems. He was also employed with Petroecuador for two years in the capacity of Pipeline Manager, where he oversaw the expansion of the Trans Ecuadorian Pipeline to 380,000 barrels per day.Commitment to corporate social responsibilityIvanhoe Energy Ecuador takes pride in its local reputation as a company that is committed to effective environmental management, to health and safety, and to consulting with and strengthening local communities. The company is conducting extensive consultations with indigenous communities located in the vicinity of proposed new well locations on Block 20, and also liaising with local authorities, the Ministry of Environment and the Ministry of Non-Renewable Resources on its operations.Ivanhoe Energy Ecuador is a Canadian company and a wholly-owned subsidiary of Ivanhoe Energy Latin America Inc., the parent company of Ivanhoe Energy Inc.'s Latin American corporate group. Ivanhoe Energy Ecuador's head office is located in Quito and conducts all operating activities in Ecuador.Ivanhoe Energy Inc. 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, patented, heavy to light upgrading process (HTL(TM)). Core operations are in Canada, Ecuador, China and Mongolia, with business development opportunities worldwide. Ivanhoe's shares trade on the NASDAQ Capital Market with the ticker symbol IVAN and on the Toronto Stock Exchange under the symbol IE.For more information about Ivanhoe Energy Inc. please visit our web site at www.ivanhoeenergy.com.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 anticipated quantities of recoverable barrels of oil or bitumen from Block 20, the scope and timing of the evaluation activities in respect of the results obtained from appraisal wells IP-5b or l IP-15, the schedule for commencement of drilling and testing of additional wells in different areas of Block 20 for which permits have already been obtained, the commencement of the permitting process for additional wells on Block 20 for which permits have not, to date, been obtained and other statements which are not historical facts. When used in this document, the words such as "could", "plan", "estimate", "anticipate", "intend", "may", "potential", "should", and similar expressions relating to matters that are not historical facts are forward-looking statements. Although Ivanhoe Energy and Ivanhoe Energy Ecuador believe that their 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 result to differ from these forward-looking statements include the possibility that the company will be unable to raise financing, 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, heavy oil samples from Block 20 may not have the product qualities anticipated, Ivanhoe Energy's lack of history in developing commercial HTL opportunities, 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 the reserves, the risk associated with doing business in foreign countries, environmental risks, changes in product prices, our availability to generate cash flow and 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.For further information: David Dyck: 1 (403) 817-1138; Ian Barnett: 1 (647) 203-6588; Dorreen Miller: 1 (403) 817-1108; info@ivanhoeenergy.com