July 11, 2008

Ivanhoe Energy Completes Acquisition of Athabasca Oilsands Assets From Talisman Energy

CALGARY, July 11 /PRNewswire-FirstCall/ -- Robert Friedland, Executive Chairman, President and Chief Executive Officer of Ivanhoe Energy Inc. (TSX: IE; NASDAQ: IVAN), announced today that the company has completed its previously announced acquisition of Talisman Energy Canada's 100% working interests in two leases (Leases 10 and 6) located in the heart of the Athabasca oilsands region in the Province of Alberta, Canada. Talisman Energy Canada is an affiliate of Talisman Energy Inc. (TSX:TLM; NYSE:TLM).

The total purchase price is C$90 million, of which an initial payment of C$22.5 million has been made from proceeds of an C$88 million private placement financing that closed on July 8th. The financing, consisting of C$3.00 special warrants and originally targeted at C$50 million, was increased to C$88ÃӚ“šÃƒÆ’“šÃƒ“š million due to significantly increased expressions of interest from institutional investors. The balance of the funds will be used for Ivanhoe Energy's planned development activities on the acquired oilsands leases and for general working capital purposes.

The acquisition of Lease 10 will provide the site for the first commercial application of Ivanhoe Energy's proprietary, HTL(TM) heavy-oil upgrading technology in a major, integrated heavy-oil project. Lease 10 has a relatively high level of delineation (four wells per section). It is believed to be a high-quality reservoir and an excellent candidate for thermal recovery production using the SAGD (steam-assisted gravity drainage) process. The Lease 10 reservoir characteristics are believed by Ivanhoe to be similar to those at Petro-Canada's 30,000-barrel-per-day MacKay River project, located nearby, across the Athabasca River. MacKay River is acknowledged to be one of the most successful and longest-producing SAGD projects in the Athabasca oil sands.

Lease 10 would be capable of producing between 30,000 and 50,000 barrels of oil per day, based on estimates by independent reservoir engineers Sproule Associates Limited. Based on the most recent evaluations conducted by Sproule, Lease 10 is estimated to contain, on a best-estimate basis, approximately 244 million barrels of contingent bitumen resources (with low and high estimates of approximately 188 million and 313 million barrels, respectively). The evaluation of Lease 10 has an effective date of August 31, 2007. Using Sproule's interpretation of net pay, Ivanhoe expects to encounter an average of 30 metres of continuous bitumen saturated sand within the initial development area.

Based on these contingent resource estimates, Ivanhoe Energy's acquisition price of C$90 million represents a price of approximately C$0.37 per barrel of contingent bitumen resource measured on a best-estimate basis, with a range of approximately C$0.29 per barrel on a high-estimate basis to approximately C$0.48 per barrel on a low-estimate basis.

Since Ivanhoe Energy's oilsands announcement on May 29th, the holder of the 25% working interest in Lease 50 has exercised its right of first refusal to acquire Talisman's 75% working interest in Lease 50 - a third lease that Ivanhoe was to acquire from Talisman. Lease 50 is a less-delineated asset located approximately 19 km southeast of Fort McMurray. Contingent bitumen resources attributable to Talisman's 75% working interest in Lease 50 were estimated by Sproule as of July 31, 2006, to be, on a best-estimate basis, approximately 50 million barrels. As a consequence, Ivanhoe Energy has proceeded to purchase Lease 10 and Lease 6 - and the total purchase price has decreased from C$105 million to C$90 million.

Lease 50 was considered by Ivanhoe to represent possible expansion potential. The reduced cost to Ivanhoe of acquiring its principal target, Lease 10, leaves Ivanhoe with additional cash resources to initiate the development of Lease 10 and also allows Ivanhoe to apply its resources to alternative expansion targets as appropriate.

   Lease 6 is a small, undelineated, 680-acre block 1.6 km south of Lease 10.    Talisman's Rights   

Talisman will retain back-in rights of up to 20% in the acquired leases for a period of three years. During this period, Talisman also will have the right of first offer to acquire any participation interests in heavy-oil projects in Alberta that Ivanhoe wishes to sell, excluding the acquired leases, on mutually agreeable terms. In addition, Ivanhoe and Talisman have entered into an HTL Data Monitoring Agreement to allow Talisman to effectively monitor the commercial effectiveness of Ivanhoe's HTL technology.

   Lease 10 to be the site for Ivanhoe's first HTL integrated heavy-oil   --------------------------------------------------------------------   project   -------  

Lease 10 is a 6,880-acre contiguous block located approximately 10 miles (16 km) northeast of Fort McMurray, immediately south of Suncor's operating Steepbank and Millennium projects. The block also adjoins leases held by ExxonMobil, Laricina Energy and E-T Energy.

The Lease 10 resource target is considered to be of high-quality McMurray sands, with clean and continuous average net pay of approximately 20 metres and no significant top- or bottom-water or top-gas issues. The average porosity is 34%, average bitumen saturation is 79% and permeabilities are between one and 10 Darcies, all of which are considered excellent reservoir characteristics. The high quality of the asset is expected to provide for favorable projected operating costs, including attractive steam-oil ratios (SOR) using SAGD development techniques.

Ivanhoe's HTL plant on Lease 10 is projected ultimately to be capable of operating at production rates of at least 30,000 barrels per day for approximately 25 years. Ivanhoe intends to integrate established SAGD thermal recovery techniques with its patented HTL upgrading process, producing and marketing a light, synthetic sour crude.

Ivanhoe plans to continue the Lease 10 delineation program in preparation for the submission of permits for an integrated HTL project. In general, thermal oilsands projects, including SAGD projects, require a period of initial development, including delineation, permitting and field development, which is followed by relatively stable operations for many years. Ivanhoe will provide guidance on expectations regarding development timelines, as appropriate, at a future date.

   Benefits of HTL Integration   ---------------------------  

HTL is a field-located upgrading process that converts heavy oil to a transportable, partially upgraded synthetic crude oil and converts the upgrading by-products to onsite energy. The process frees the heavy-oil producer from the need to purchase diluent for transport, significantly eliminates the need to purchase natural gas to steam the reservoir, and allows the producer to capture the majority of the heavy-oil/light-oil value differential. The net result is enhanced rates of return and reduced earnings volatility. Furthermore, the HTL process is technically and economically scalable down to as low as 10,000-30,000 bopd, allowing for vertical integration of smaller, heavy-oil assets in Canada and internationally.

Purchase details

Ivanhoe has purchased all of Talisman's interests in Leases 10 and 6. The total purchase price for the two leases is C$90 million, allocated as follows:

   1.  C$22.5 million cash that has been paid.    2.  A C$12.5 million note, with interest at prime plus 2%, is to be       repaid on or before December 31, 2008.    3.  A C$40 million, three-year convertible note, with interest at prime       plus 2% with principal convertible at C$3.13, which represents a 25%       premium to Ivanhoe Energy's share price based on the volume-adjusted,       weighted-average closing price for the 10 business days prior to the       signing of the preliminary agreement on May 29th. If the note were       fully converted, 12,779,552 common shares of Ivanhoe Energy would be       issued to Talisman, representing approximately 4.44% of the issued       and outstanding shares of Ivanhoe Energy as of July 11th, after       giving effect to the conversion, as well as the C$88 million       financing that just closed.    4.  C$15 million cash upon Ivanhoe Energy receiving requisite government       and other approvals to develop the northern border of Lease 10, which       is subject to a Mineral Surface Lease (MSL) held by Suncor.   

Ivanhoe's obligations under the notes and the contingent payment are secured.

Ivanhoe intends to finance future payments with funds from a combination of strategic investors and/or traditional debt and equity markets, either at the Ivanhoe Energy Inc. level or project level.

Financial Advisor

Tristone Capital Inc. is acting as financial advisor to Ivanhoe for this transaction.

   Ivanhoe Energy   --------------  

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, patented heavy-oil upgrading process (HTL). Core operations are in the United States and China, with business development opportunities worldwide. Ivanhoe Energy's shares trade on the NASDAQ Capital Market with the ticker symbol IVAN and on the Toronto Stock Exchange with the symbol IE.

Ivanhoe Energy has established a number of geographically focused entities. The parent company, Ivanhoe Energy Inc., will pursue HTL opportunities in the Athabasca oilsands of Western Canada and will hold and manage the core HTL technology. Two new subsidiaries have been established, one for Latin America and one for the Middle East & North Africa, complementing Sunwing Energy Ltd., Ivanhoe Energy's existing, wholly-owned company for China. Dave Martin is leading the subsidiary for Latin America and Leon Daniel is leading the subsidiary for the Middle East & North Africa. Ivanhoe Energy Inc. owns 100% of each of these subsidiaries, although the percentages are expected to decline as they develop their respective businesses and raise capital independently.

This structure will allow the development and financing of multiple HTL projects around the world, while minimizing dilution of 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.

Building an execution team

During recent months, Ivanhoe Energy has made significant progress in building its execution teams in preparation for this acquisition. The upstream team consists of a number of Calgary-based, experienced heavy-oil engineers and geologists hired from firms such as Petro-Canada and Synenco, complemented by a core team of petroleum engineers and geologists located in Ivanhoe's offices in Bakersfield, California, a number of whom are expected to move to Calgary, Alberta, in the summer of 2008. The Houston-based HTL technology team also has been strengthened. Ivanhoe expects to continue filling key positions as it moves into execution mode.

STATEMENTS CONCERNING RESOURCES: The determination of oil and gas resources involves the preparation of estimates that have an inherent degree of associated risk and uncertainty. The estimation and classification of resources requires the application of professional judgment combined with geological and engineering knowledge to assess whether specific classification criteria have been satisfied. Statements in this press release concerning "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, of the ability to produce in the future the resources described. Actual resources and, if commenced, future production will differ from the estimates provided herein, and the difference may be significant.

All bitumen resource volumes referred to in this press release have been classified as "contingent resources" within the meaning of the Canadian Oil & Gas Evaluation Handbook (COGE Handbook). The term "contingent resources" is defined in the COGE Handbook as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. It is appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent resources are further classified in accordance with the level of uncertainty associated with the estimates and may be subclassified based on project maturity and/or characterized by their economic status.

Estimates of resources, which always involve uncertainty, are quoted herein as a range according to the level of confidence associated with the estimates. The "best estimate" is considered to be the best estimate of the quantity of bitumen resources that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. The "low estimate" is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. The "high estimate" is considered to be an optimistic estimate of the quantity that will be actually recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate.

The contingencies that currently prevent the contingent resources referred to herein from being classified as reserves are a lack of regulatory approval, the absence of a firm development plan, and the uncertainty of funding approval for development. There is no certainty that it will be commercially viable to produce any portion of the contingent resources referred to in this press release.

Cautionary Note to U.S. Investors -- The Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this press release, such as contingent bitumen resources that the SEC's guidelines strictly prohibit us from including in filings with the SEC. Investors are urged to also consider closely the disclosure in our Form 10-K for the fiscal year ended December 31, 2007, available from our website. You can also obtain this form from the SEC website at http://www.sec.gov/.

The reference herein to production levels at Petro-Canada's MacKay River project is based on publicly available information. The reference herein to the similarity between the Lease 10 reservoir characteristics and those of the MacKay River project is based on Ivanhoe's internal assessment.

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 Ivanhoe Energy's agreement with Talisman to acquire all of Talisman's working interest in two oil sand leases (leases 10 and 6), Ivanhoe Energy's ability to obtain the financing to pay the principal and interest on the notes delivered by Ivanhoe Energy at the acquisition closing, Ivanhoe Energy's plan to establish its first integrated HTL heavy-oil project on Lease 10, the anticipated production capacity of the proposed HTL plant, the anticipated quantities of recoverable barrels of bitumen from leases 10 and 50, 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 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 result to differ from these forward-looking statements include the possibility that the company will be unable to raise financing in the future, 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, samples from the Athabasca bitumen test may not have the product qualities anticipated, market acceptance of the HTL technology may not be as 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 associates 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.

Ivanhoe Energy Inc.

CONTACT: Investors Contact: Ian Barnett, (647) 203-6588; Bill Trenaman,(604) 688-8323; Media Contact: Bob Williamson, (604) 688-8323; Website:http://www.ivanhoeenergy.com/