Toreador Resources (TRGL) 10-Q 2004 Q3 Quarterly report

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

            (Mark one)

[ X ]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE   
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedSeptember 30, 2004

OR

[ __ ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 0-02517

TOREADOR RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)

Delaware	75-0991164
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

4809 Cole Avenue, Suite 108                 Dallas, Texas	75205
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:    (214) 559-3933

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   X   No      

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Yes       No   X  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at November 11, 2004
Common Stock, $0.15625 par value	9,758,719 shares

TOREADOR RESOURCES CORPORATION

INDEX

	Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets (Unaudited)	1
September 30, 2004 and December 31, 2003
Consolidated Statements of Operations (Unaudited)	2
Three and Nine Months Ended September 30, 2004 and 2003
Consolidated Statements of Cash Flows (Unaudited)	3
Three and Nine Months Ended September 30, 2004 and 2003
Notes to Consolidated Financial Statements	4
Item 2. Management's Discussion and Analysis of Financial Condition and	13
Results of Operations
Item 3. Quantitative and Qualitative Disclosure about Market Risk	22
Item 4. Controls and Procedures	22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3. Defaults Upon Senior Securities	23
Item 4. Submission of Matters to a Vote of Security Holders	23
Item 5. Other Information	23
Item 6. Exhibits	23
Signatures	25
Exhibit Index	28

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TOREADOR RESOURCES CORPORATION

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30, 2004		December 31, 2003
ASSETS	(in thousands, except share data)
Current assets:
Cash and cash equivalents	$      7,604		$      2,819
Accounts and notes receivable	3,769		4,053
Royalty properties held avaliable-for-sale	—		13,157
Other	2,246		2,863
Total current assets	13,619		22,892
Oil and gas properties, net, using the successful efforts method of accounting	73,588		64,459
Investments in unconsolidated entities	980		529
Goodwill	3,276		3,293
Other assets	1,270		369
Total assets	$ 92,733		$ 91,542
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$   7,791		$   6,881
Unrealized loss on commodity derivatives	206		1,159
Current portion of long-term debt	—		28,816
Income taxes payable	3,926		757
Total current liabilities	11,923		37,613
Long-term accrued liabilities	782		958
Long-term asset retirement obligation	1,854		1,698
Deferred tax liability	9,840		11,791
Convertible subordinated notes	7,500		—
Convertible subordinated debenture	2,160		2,160
Total liabilities	34,059		54,220
Stockholders' equity:
Preferred stock, Series A & A-1, $1.00 par value, 4,000,000 shares
authorized; liquidation preference of $8,000,000; 320,000 issued	320		320
Common stock, $0.15625 par value, 30,000,000
shares authorized; 10,366,496 issued and 10,058,544 shares issued	1,620		1,572
Capital in excess of par value	34,862		33,562
Retained earnings	24,685		18
Accumulated other comprehensive income	(279)		4,384
	61,208		39,856
Treasury stock at cost:
721,027 shares	(2,534	)	(2,534	)
Total stockholders' equity	58,674		37,322
Total liabilities and stockholders' equity	$ 92,733		$ 91,542

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TOREADOR RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Three Months Ended September 30,					Nine Months Ended September 30,
		2004		2003		2004		2003
				(in thousands, except per share data)
Revenues:
Oil and gas sales		$   5,631		$ 5,616		$ 14,613		$ 13,592
Lease bonuses and rentals		—		4		14		18
Total revenues		5,631		5,620		14,627		13,610
Costs and expenses:
Lease operating		1,603		2,254		5,036		5,323
Exploration and acquisition		432		413		984		812
Depreciation, depletion and amortization		954		880		2,568		2,413
Reduction in force		—		—		116		466
General and administrative		1,081		710		3,735		2,704
Total costs and expenses		4,070		4,257		12,439		11,718
Operating income (loss)		1,561		1,363		2,188		1,892
Other income (expense)
Equity in gains (losses) of unconsolidated    investments		74		(56	)	21		(6	)
Gain on sale of properties and other assets		35		70		45		138
Foreign currency exchange gain (loss)		(3	)	59		4,811		857
Interest and other income		87		44		265		73
Interest expense		(313	)	(302	)	(1,373	)	(888	)
Total other income (expense)		(120	)	(185	)	3,769		174
Income before taxes		1,441		1,178		5,957		2,066
Provision (benefit) for income taxes		(364	)	483		(896	)	929
Income from continuing operations		1,805		695		6,853		1,137
Income from discontinued operations, net of tax		81		376		18,354		1,306
Net income		1,886		1,071		25,207		2,443
Less: dividends on preferred shares		180		125		540		347
Income available to common shares		$     1,706		$  946		$   24,667		$  2,096
Basic income per share		$    0.18		$   0.10		$    2.60		$    0.22
Diluted income per share		$    0.15		$   0.09		$    2.04		$    0.22
Weighted average shares outstanding
Basic		9,593		9,338		9,503		9,338
Diluted		13,369		10,825		12,406		9,344

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TOREADOR RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Three Months Ended September 30,					Nine Months Ended September 30,
		2004		2003		2004		2003
				(in thousands)
Cash flows from operating activities:
Net income		$   1,886		$ 1,072		$ 25,207		$ 2,443
Adjustments to reconcile net income to net cash           provided by operating activities:
Depreciation, depletion and amortization		1,322		996		2,938		2,924
Gain on sale of properties		(35	)	(70	)	(28,783	)	(138	)
Realized (gain) loss on foreign currency           transactions		3		—		(4,811	)	—
Unrealized (gains) losses on commodity           derivatives		(97	)	(888	)	(360	)	16
Equity in (gains) losses of unconsolidated           investments		(74	)	20		(21	)	6
Cash flows from operating activities before           changes in working capital		3,005		1,130		(5,830	)	5,251
Decrease (increase) in operating assets:
Accounts and notes receivable		345		721		645		283
Income taxes receivable		—		—		—		512
Other current assets		785		(168	)	320		(246	)
Other assets		(1	)	32		248		(45	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities		2,033		608		371		(190	)
Income taxes payable		(3,297	)	619		3,169		1,677
Deferred tax liabilities		(2	)	(193	)	778		(193	)
Other		—		539		—		48
Net cash provided by (used in) operating                   activities		2,868		3,288		(299	)	7,097
Cash flows from investing activities:
Expenditures for oil and natural gas properties		(6,671	)	(2,642	)	(12,434	)	(4,708	)
Proceeds from the sale of oil and natural gas    properties		7		29		41,957		442
Proceeds from the sale of marketable securities		—		46		—		46
Investment in and advances to unconsolidated    entities, net		(505	)	—		(834	)	—
Net cash provided by (used in) investing                   activities		(7,169	)	(2,567	)	28,689		(4,220	)
Cash flows from financing activities:
Payment for debt issuance costs		(1,195	)	—		(1,195	)	—
Borrowings under revolving credit arrangements		—		(505	)	—		1,371
Repayments under revolving credit arrangements		—		(607	)	(28,816	)	(5,258	)
Proceeds from issuance of stock, net		390		—		1,348		—
Issuance of preferred stock		—		1,000		—		1,000
Proceeds from issuance of convertible subordinated    notes		7,500		—		7,500		—
Payments of preferred dividends		(180	)	(125	)	(540	)	(347	)
Net cash provided by (used in) financing                   activities		6,515		(237	)	(21,703	)	(3,234	)
Net increase (decrease) in cash and cash equivalents		2,214		484		6,687		(357	)
Effects of foreign currency translation on cash and cash equivalents		(1,697	)	—		(1,902	)	—
Cash and cash equivalents, beginning of period		7,087		135		2,819		976
Cash and cash equivalents, end of period		$   7,604		$ 619		$ 7,604		$ 619

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1 – BASIS OF PRESENTATION

        You should read these consolidated unaudited financial statements along with the consolidated financial statements and notes in the 2003 Annual Report on Form 10-K of Toreador Resources Corporation (the “Company, Toreador, we, us, our”) filed with the Securities and Exchange Commission. In our opinion, the information furnished herein reflects all normal nonrecurring adjustments necessary for a fair presentation of the results of these interim periods.

        Unless otherwise noted, amounts reported in tables are in thousands, except per share and product per unit data.

NOTE 2 – DISCONTINUED OPERATIONS

        In January 2004, we sold our U.S. mineral and royalty assets to Black Stone Acquisitions Partners I, L.P. (the “Royalty Sale”). We retained all of our working-interest properties. From the approximate $45.0 million cash consideration that we received, we discharged our outstanding credit facilities in full and placed approximately $8.0 million in a tax-deferred escrow account for a possible like-kind exchange. The escrow account was designed to comply with the like-kind exchange provisions of Section 1031 of the Internal Revenue Code of 1986, as amended, which permits the deferral of gains from a sale of assets if specific like-kind exchange criteria are met. We were unable to acquire working-interests satisfactory to the Company’s long-term business objectives that would comply with the like-kind exchange criteria; therefore, the $8.0 million was transferred to our general operating fund.

NOTE 3 – COMPREHENSIVE INCOME

The following table presents the components of comprehensive income, net of related tax:

	Three Months Ended September 30,					Nine Months Ended September 30,
		2004		2003		2004		2003
Income avaliable to common shares		$  1,706		$ 946		$ 24,667		$ 2,096
Foreign currency translation adjustment		53		(360	)	(4,666	)	1,058
Change in fair value of avaliable-for-sale securities		(14	)	(5	)	(18	)	13
Comprehensive income		$  1,745		$ 581		$ 19,983		$ 3,167

NOTE 4 – RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

        On August 15, 2001, the FASB issued Statement No. 143, Accounting for Asset Retirement Obligations (“Statement 143”). We adopted Statement 143 on January 1, 2003. Upon adoption of Statement 143, we recorded an increase to Property and Equipment and an offsetting entry to Asset Retirement Obligations of approximately $1,690,000 and $1,716,000, respectively, as a result of the Company separately accounting for salvage values and recording the estimated fair value of its plugging and abandonment obligation on the balance sheet. The impact of adopting Statement 143 was determined to be immaterial. We do not expect the effects of adopting Statement 143 to have a material impact on our financial position or results of operations in future years.

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

        The following table describes our asset retirement liability as of the nine months ended September 30, 2004 and 2003:

	2004		2003
Asset retirement obligation January 1	$1,781		$1,690
Asset retirement accretion expense	79		78
Less: plugging cost	(4	)	(5	)
Less: property sold	(2	)	(1	)
Asset retirement obligation at September 30	$1,854		$1,762

        In July 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“Statement 146”). Statement 146 requires that a liability for costs associated with an exit or disposal activity should be initially recognized when it is incurred. Examples of costs included under Statement 146 include one-time termination benefits, costs to consolidate or close facilities and costs to relocate employees. On June 17, 2003, Toreador committed to the termination of four employees. Two engineers, one geologist and one part-time employee were terminated in an effort to reduce general and administrative costs. On February 2, 2004, we committed to the termination of two landmen as a result of the Royalty Sale in January 2004. Total severance expense and liability for the nine months ended September 30, 2004, were approximately $116,000 and zero, respectively. The following table provides a reconciliation of the liability:

Exit Cost or Disposal Activity	Amount
Employee severance liability June 17, 2003	$310
Cost incurred	116
Adjustments	—
Less: Payroll payments	(426	)
Severance liability September 30, 2004	$  —

        In December 2002, the FASB issued Statement No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure (“Statement 148”). Statement 148 provides alternative methods of transition to the fair value method of accounting proscribed by FASB Statement No. 123, Accounting for Stock-Based Compensation (“Statement 123”). Statement 148 also amends the disclosure provisions of Statement 123 and Accounting Principles Board Opinion No. 28, Interim Financial Reporting, to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. Statement 148 does not require companies to account for employee stock options under the fair value method. We do not anticipate adopting the fair value method of accounting for stock-based compensation; however, we have adopted the disclosure provisions of Statement 148 in this filing. Net income would have been adjusted for the pro forma amounts as follows:

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

	Three Months Ended September 30,			Nine Months Ended September 30,
		2004	2003	2004	2003
Income, applicable to common shares, as reported		$  1,706	$ 946	$ 24,667	$ 2,096
Basic earnings per share reported		0.18	0.10	2.60	0.22
Diluted earnings per share reported		0.15	0.09	2.04	0.22
Stock-based compensation costs under the intristic
value method included in net income
reported, net of related tax		—	—	—	—
Pro-forma stock-based compensation costs under the
fair value method, net of related tax		35	85	795	224
Pro-forma income applicable to common shares,
as under the fair-value method		1,671	861	23,872	1,872
Pro-forma basic earnings per share under the fair
value method		0.17	0.09	2.51	0.20
Pro-forma diluted earnings per share under the fair
value method		0.15	0.08	1.98	0.20

NOTE 5 – GEOGRAPHIC OPERATING SEGMENT INFORMATION

        We have operations in only one industry segment, the oil and gas exploration and production industry. We are structured along geographic operating segments or regions. As a result, we have reportable operations in the United States, France and Turkey. Geographic operating segment income tax expenses have been determined based on statutory rates existing in the various tax jurisdictions where we have oil and natural gas producing activities.

        The following tables provide the geographic operating segment data required by Statement of Financial Accounting Standards No. 131, Disclosure about Segments of an Enterprise and Related Information.

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

	Three Months Ended September 30,
	2004												2003
	United States			France			Turkey			Total			United States			France			Turkey			Total
	(in thousands)
Revenues:
Oil and gas sales	$	812		$	4,147		$	672		$	5,631		$	2,111		$	2,570		$	935		$	5,616
Lease bonus and rentals		—			—			—			—			4			—			—			4
Total revenues		812			4,147			672			5,631			2,115			2,570			935			5,620
Cost and expenses:
Lease operating		431			950			222			1,603			426			1,216			612			2,254
Exploration and acquisition		436			(6	)		2			432			358			44			11			413
Depreciation, depletion and
amortization		355			461			138			954			301			326			253			880
General and administrative		623			267			191			1,081			388			187			135			710
Total costs and expenses		1,845			1,672			553			4,070			1,473			1,773			1,011			4,257
Operating income (loss)		(1,033	)		2,475			119			1,561			642			797			(76	)		1,363
Other income (expense)
Equity in gains (losses) of
unconsolidated investments		74			—			—			74			(56	)		—			—			(56	)
Gain (loss) on sale of properties		35			—			—			35			70			—			—			70
Foreign currency exchange gain (loss)		—			(3	)		—			(3	)		(33	)		92			—			59
Interest & other income (expense)(1)		7			42			38			87			86			(17	)		(25	)		44
Interest expense(1)		(312	)		1			(2	)		(313	)		(177	)		(138	)		13			(302	)
Total other income (expense)		(196	)		40			36			(120	)		(110	)		(63	)		(12	)		(185	)
Income (loss) before taxes		(1,229	)		2,515			155			1,441			532			734			(88	)		1,178
Provision (benefit) for income taxes		(364	)		—			—			(364	)		244			272			(33	)		483
Income (loss) from continuing operations		(865	)		2,515			155			1,805			288			462			(55	)		695
Income from discontinued operations,
net of tax(2)		81			—			—			81			376			—			—			376
Net income (loss)	$	(784	)	$	2,515		$	155		$	1,886		$	664		$	462		$	(55	)	$	1,071
Dividends on preferred shares		180			—			—			180			125						—			125
Total assets(1)	$	98,759		$	35,762		$	12,722		$	92,733		$	89,892		$	29,661		$	11,401		$	89,937

           (1)    Interest income and expense and total consolidated assets reflect the effect of intersegment eliminations.
           (2)    All results relating to the mineral and royalty properties are required to be disclosed as discontinued operations.
                    Please see “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations”
                     under “Results of Operations” for a more detailed description.

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

	Nine Months Ended September 30,
	2004												2003
	United States			France			Turkey			Total			United States			France			Turkey			Total
	(in thousands)
Revenues:
Oil and gas sales	$	3,210		$	9,746		$	1,657		$	14,613		$	4,487		$	6,939		$	2,166		$	13,592
Lease bonus and rentals		14			—			—			14			18			—			—			18
Total revenues		3,224			9,746			1,657			14,627			4,505			6,939			2,166			13,610
Cost and expenses:
Lease operating		1,218			3,243			575			5,036			1,124			3,185			1,014			5,323
Exploration and acquisition		924			(6	)		66			984			696			44			72			812
Depreciation, depletion and
amortization		1,032			1,110			426			2,568			842			957			614			2,413
Reduction in force		116			—			—			116			466			—			—			466
General and administrative		2,536			668			531			3,735			1,301			904			499			2,704
Total costs and expenses		5,826			5,015			1,598			12,439			4,429			5,090			2,199			11,718
Operating income (loss)		(2,602	)		4,731			59			2,188			76			1,849			(33	)		1,892
Other income (expense)
Equity in gains (losses) of
unconsolidated investments		21			—			—			21			(6	)		—			—			(6	)
Gain on sale of properties		45			—			—			45			138			—			—			138
Foreign currency exchange gain (loss)		—			4,811			—			4,811			(33	)		890			—			857
Interest and other income (expense)(1)		41			182			42			265			140			16			(83	)		73
Interest expense(1)		(310	)		(987	)		(76	)		(1,373	)		(509	)		(379	)		—			(888	)
Total other income (expense)		(203	)		4,006			(34	)		3,769			(270	)		527			(83	)		174
Income (loss) before taxes		(2,805	)		8,737			25			5,957			(194	)		2,376			(116	)		2,066
Provision (benefit) for income taxes		(896	)		—			—			(896	)		93			879			(43	)		929
Income (loss) from continuing operations		(1,909	)		8,737			25			6,853			(287	)		1,497			(73	)		1,137
Income from discontinued operations,
net of tax(2)		18,354			—			—			18,354			1,306			—			—			1,306
Net income (loss)	$	16,445		$	8,737		$	25		$	25,207		$	1,019		$	1,497		$	(73	)	$	2,443
Dividends on preferred shares		540			—			—			540			347			—			—			347
Total assets(1)	$	98,759		$	35,762		$	12,722		$	92,733		$	89,892		$	29,661		$	11,401		$	89,937

           (1)    Interest income and expense and total consolidated assets reflect the effect of intersegment eliminations.
           (2)    All results relating to the mineral and royalty properties are required to be disclosed as discontinued operations.
                    Please see “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations”
                     under “Results of Operations” for a more detailed description.

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 6 – DERIVATIVE FINANCIAL INSTRUMENTS

        We utilize commodity derivative instruments as part of our risk management program. These commodity derivatives are not designated as hedges. These transactions are generally structured as either swaps or collar contracts. A swap has the effect of an outright sale at a specific price. A collar has the effect of creating a sale only if the price falls below a floor price or exceeds a ceiling price. These instruments reduce the effect of the price fluctuations of the commodities we produce and sell and support our annual capital budget and expenditure plans. When we had our senior credit facilities, these instruments protected the amounts required for servicing outstanding debt and maximized the funds available under those credit facilities. The trading party that represents the other side of each of these transactions is known as a “counterparty.” The counterparty of our United States transactions is Coral Energy Holdings, L.P., an affiliate of Royal Dutch/Shell. Currently we do not have any commodity derivative instruments for our foreign production.

        The following table lists our open natural gas derivative contracts as of September 30, 2004. All contracts are based on NYMEX pricing. We estimated the fair value of the option agreement at September 30, 2004, from quotes by the counterparty representing the amounts we would expect to receive or pay to terminate the agreements on that date. We estimated the fair value of the swap agreement based on the difference between the strike prices and the forward NYMEX prices for each determination period multiplied by the notional volume for each period.

Contract Type	Effective Date	Termination Date	Notional Volume per Month (MMBtu)(1)	Aggregate Volume (MMBtu)	Strike Price per MMBtu	Fair Value- Gain/(Loss) September 30, 2004
Put Option	November 2004	December 2004	50,000	100,000	$ 3.250	$              —
Call Option	November 2004	December 2004	50,000	100,000	$ 5.275	$    (205,500)

           (1)    MMBtu - Million British thermal units.

NOTE 7 – LONG-TERM DEBT

        In July 2004, we sold to certain institutional investors pursuant to a private offering $7.5 million aggregate principal amount of Convertible Subordinated Notes (the “Notes”) due June 30, 2009. The Notes bear interest at the rate of 7.85% per annum and are convertible into shares of common stock at a conversion price of $8.20 per share. The Company may force conversion of the Notes on or after January 22, 2005, if the closing price of Toreador’s common stock is greater than $14.35 for the 30 consecutive trading days prior to the date of the Company’s notice of conversion. Toreador may also elect to prepay the Notes at any time for the outstanding principal amount plus a 2% premium and accrued and unpaid interest and the issuance of warrants exercisable into the same number of shares of common stock as the Notes were convertible into before the prepayment and retirement of the Notes at an exercise price equal to the conversion price immediately prior to the prepayment and retirement of the Notes. We intend to use the net proceeds of the offering to accelerate our oil development program in France’s Paris Basin and for general corporate purposes.

9

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

        At the end of 2003, we had two senior borrowing facilities. The Bank of Texas facility (the “Texas Facility”) had borrowings outstanding of approximately $17.0 million at December 31, 2003. We discharged the Texas Facility in January 2004 with a portion of the proceeds from the Royalty Sale.

        The revolving credit facility with Barclays Bank, Plc (the “Barclays Facility”) had approximately $11.8 million outstanding at December 31, 2003. We discharged the Barclays Facility in January 2004 with a portion of the proceeds from the Royalty Sale. Under the terms of the Warrant Buyback Letter dated May 19, 2003, we were required to buyback 500,000 outstanding warrants from Barclays for the sum of $100,000 upon final settlement of the Barclays Facility. Additionally, we were required to make a final settlement payment of $925,000 less the amounts of any payments made to Barclays for interim fees due before the final settlement under the terms of the Settlement Fee Letter dated May 19, 2003. The settlement payment amount after deduction of the interim fees paid to Barclays was approximately $806,000.

NOTE 8 – LITIGATION

        Karak Petroleum. Madison Oil Company (“Madison”), a wholly owned subsidiary of Toreador and its wholly owned subsidiary Trans-Dominion Holdings Ltd. were named as defendants in a complaint filed in Alberta, Canada, in 1999. The complaint arose from a dispute between Karak Petroleum (“Karak”), a subsidiary of Trans-Dominion Holdings, and the operator of an exploratory well in Pakistan in 1994 in which Karak was a joint interest partner. The plaintiffs alleged that they were owed approximately $500,000. On August 7, 2002, we reached an agreement with the plaintiffs in this matter. Under the terms of the agreement, we agreed to pay the plaintiffs $400,000 for full release of liability. Written documentation reflecting the foregoing was finalized on August 29, 2002. The agreement required that we remit the $400,000 in two installments. The first installment of $50,000 was paid on August 29, 2002, and the remaining $350,000 was to be paid by February 3, 2003. This liability was recorded in 2002. In February 2003, the plaintiffs agreed to accept the $350,000 in monthly installments payable at the beginning of each month beginning February 2003. Payments totaling $105,000 were made during 2003. The remaining balance was paid in January 2004.

        Turkish Registered Capital. Under the existing Petroleum Law of Turkey, capital that is invested by foreign companies in projects such as oil and natural gas exploration can be registered with the General Directorate of Petroleum Affairs, thereby qualifying for protection against adverse changes in the exchange rate between the time of the initial investment and the time such capital is repatriated out of Turkey. Since 1997 the Turkish government has suspended such protection for repatriated capital. As holder of more than $50 million of registered capital, we have filed suit in Turkey to attempt to restore the exchange rate protections afforded under the law. No amounts have been accrued related to this contingency. Holders of Madison common stock, on the anniversary date of the merger, have the right to receive, in cash or our common stock, 30% of certain potential payments that may be received from the Turkish government for the protection of repatriated capital. In March 2002 a lower level court ruled in favor of Madison. The ruling was subject to automatic appeal that was heard in December 2002. The appellate court reversed the lower court’s ruling. We have appealed the ruling of the appellate court and are waiting on a final determination. The current appeal is the last appeal that can be made by either side in this case. We cannot predict the outcome of this matter.

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Index

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 9 – EARNINGS PER COMMON SHARE

The following table reconciles the numerators and denominators of the basic and diluted earnings per ordinary share computation:

	Three Months Ended September 30,			Nine Months Ended September 30,
		2004	2003	2004	2003
			(in thousands, except per share data)
Basic earnings per share:
Numerator:
Income from continuing operations, net of tax		$ 1,805	$ 695	$ 6,853	$ 1,137
Income from discontinued operations, net of tax		81	376	18,354	1,306
Net income		1,886	1,071	25,207	2,443
Less: dividends on preferred shares		180	125	540	347
Income applicable to common shares		$ 1,706	$ 946	$ 24,667	$ 2,096
Denominator:
Common shares outstanding		9,593	9,338	9,503	9,338
Basic earnings per share from:
Continuing operations		$ 0.17	$ 0.06	$ 0.67	$ 0.08
Discontinued operations		0.01	0.04	1.93	0.14
Income per share applicable to common            shares		$ 0.18	$ 0.10	$ 2.60	$ 0.22
Diluted earnings per share:
Numerator:
Income from continuing operations,            net of tax		$ 1,805	$ 695	$ 6,853	$ 1,137
Income from discontinued operations,             net of tax		81	376	18,354	1,306
Net income		1,886	1,071	25,207	2,443
Plus: interest on notes and debenture, net            of tax		96	N/A(1)	151	N/A(1)
Less: dividends on preferred shares		N/A(2)	125	N/A(2)	347
Income applicable to common shares		$ 1,982	$ 946	$ 25,358	$ 2,096
Denominator:
Common shares outstanding		9,593	9,338	9,503	9,338
Common stock options and warrants		750	6	346	6
Conversion of preferred shares		2,000	1,481	2,000	N/A(3)
Conversion of notes payable		706	N/A(3)	237	N/A(3)
Conversion of debenture		320	N/A(3)	320	N/A(3)
Diluted shares outstanding		13,369	10,825	12,406	9,344
Basic earnings per share from:
Continuing operations		$ 0.14	$ 0.06	$ 0.56	$ 0.08
Discontinued operations		0.01	0.03	1.48	0.14
Income per share applicable to                  common shares		$ 0.15	$ 0.09	$ 2.04	$ 0.22

           (1)    Because we assume that the debenture was antidilutive, interest, net of tax, was paid and should not be added back to earnings.
           (2)    Because we assumed that the preferred shares were converted into common shares, there would have been no dividends paid.
           (3)    The conversion of the preferred shares and debenture would have been antidilutive. Therefore, no conversion is assumed for this
           calculation.

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Index

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 10 – INCOME TAXES

        We use the liability method to account for income taxes. Under this method a tax provision is made for both current and deferred taxes for the period. The components of the provision are then recorded as a net asset or liability for the current and deferred amounts.

        For the nine months ended September 30, 2004, a benefit for income taxes of $896,000 was recognized for continuing operations. A tax provision of $10.2 million was recorded as part of income from discontinued operations, net of tax. The net tax provision was $9.3 million with a corresponding increase in the current and deferred tax liabilities.

NOTE 11 – RELATED PARTY TRANSACTIONS

        On June 14, 2004, we issued stock options to purchase 29,500 shares of our common stock to David M. Brewer. Mr. Brewer currently serves as a director for Toreador. The options were granted in payment to Mr. Brewer for consulting services related to our international activities. The options were granted pursuant to the Toreador Resources Corporation 2002 Stock Option Plan. The exercise price was $5.50 per share. The options expire no later than 10 years from the date of issuance. We recorded a charge to general and administrative costs of $58,000 representing the cost of options calculated by the Black-Scholes model in the second quarter of 2004.

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Index

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS

        Certain matters discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report may constitute “forward-looking” statements for purposes of the Securities Act of 1933, and the Securities Exchange Act of 1934 and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. When used in this report, the words “anticipates,” “estimates,” “plans,” “believes,” “continues,” “expects,” “projections,” “forecasts,” “intends,” “may,” “might,” “could,” “should,” and similar expressions are intended to be among the statements that identify forward-looking statements. Various factors that could cause the actual results, performance or achievements to differ materially from our expectations are disclosed in this report (“Cautionary Statements”), including, without limitation, those statements made in conjunction with the forward-looking statements included under the caption identified above and otherwise herein. All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by the Cautionary Statements.

EXECUTIVE OVERVIEW

        The Company’s financial and operating performance since the beginning of the third quarter of 2004 included the following highlights:

                    •     Cash flow from operating activities before changes in working capital increased to $3.0 million.

                    •     The development program in our French Neocomian fields that includes three sidetrack wells and three deviated wells began in October 2004.

                    •     The Ayazli #1 well in the Black Sea of Turkey resulted in a natural gas discovery in August 2004, with tested flow rates of approximately 15 million cubic feet per day. The well is currently shut-in, awaiting further field development.

                    •     Lease operating expenses were further reduced to $1.6 million in the third quarter 2004, a 30% decline from lease operating expenses of $2.3 million in the third quarter of 2003.

                    •     Net income was $1.9 million in the third quarter 2004, a 73% increase from net income of $1.1 million in the third quarter of 2003.

        The Company recorded income applicable to common shares of $1.7 million ($0.15 per diluted share) for the three months ended September 30, 2004, compared with $946,000 ($0.09 per diluted share) for the year-ago period.

LIQUIDITY AND CAPITAL RESOURCES

        This section should be read in conjunction with Note 7 in the Notes to Consolidated Financial Statements included in this filing.

        For the first nine months of 2004, net cash used in operations was $299,000, compared with $7.1 million provided by operations for the year-ago period. During the nine months ended September 30, 2004, we received $42.0 million in proceeds from sales of property and equipment, net of expenses. We expect that cash flow provided by operating income, plus depreciation, for the remaining three months of 2004 will be approximately $3.0 million.

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Index

        At the end of 2003, we had two senior borrowing facilities. The Bank of Texas facility (the “Texas Facility”) had borrowings outstanding of approximately $17.0 million at December 31, 2003. We discharged the Texas Facility in January 2004.

        The revolving credit facility with Barclays Bank, Plc (the “Barclays Facility”) had approximately $11.8 million in borrowings outstanding at December 31, 2003. We also discharged the Barclays Facility in January 2004. Under the terms of the Warrant Buyback Letter dated May 19, 2003, we were required to buyback 500,000 outstanding warrants from Barclays for the sum of $100,000 upon final settlement of the Barclays Facility. Additionally, we were required to make a final settlement payment of $925,000 less the amounts of any payments made to Barclays for interim fees due before the final settlement under the terms of the Settlement Fee Letter dated May 19, 2003. The settlement payment amount after deduction of the interim fees paid to Barclays was approximately $806,000.

        In July 2004, we sold to certain institutional investors pursuant to a private offering $7.5 million aggregate principal amount of Convertible Subordinated Notes (the “Notes”) due June 30, 2009. The Notes bear interest at the rate of 7.85% per annum and are convertible into shares of common stock at a conversion price of $8.20 per share. The Company may cause the Notes to be converted on or after January 22, 2005, if the closing price of Toreador’s common stock is greater than $14.35 for the 30 consecutive trading days prior to the date of the Company’s conversion notice. Toreador may also elect to prepay the Notes at any time for the outstanding principal amount plus a 2% premium and accrued and unpaid interest and the issuance of warrants exercisable into the same number of shares of common stock as the Notes were convertible into before the prepayment and retirement of the Notes at an exercise price equal to the conversion price immediately prior to the prepayment and retirement of the Notes. We intend to use the net proceeds of the offering to accelerate our oil development program in France’s Paris Basin and for general corporate purposes.

        Toreador had 160,000 shares of nonvoting Series A Convertible Preferred Stock outstanding at September 30, 2004. At the option of the holder, the Series A Convertible Preferred Stock may be converted into common shares at a price of $4.00 per common share (conversion would amount to 1,000,000 Toreador common shares). The Series A Convertible Preferred Stock accrues dividends at an annual rate of $2.25 per share payable quarterly in cash. At any time on or after December 1, 2004, we may elect to redeem for cash any or all shares of Series A Convertible Preferred Stock. The optional redemption price per share is the sum of (1) $25.00 per share of the Series A Convertible Preferred Stock plus (2) any accrued unpaid dividends, and such sum is multiplied by a declining multiplier. The multiplier is 105% until November 30, 2005, 104% until November 30, 2006, 103% until November 30, 2007, 102% until November 30, 2008, 101% until November 30, 2009, and 100% thereafter.

        Toreador had 160,000 shares of nonvoting Series A-1 Convertible Preferred Stock outstanding at September 30, 2004. At the option of the holder, the Series A-1 Convertible Preferred Stock may be converted into common shares at a price of $4.00 per common share (conversion would amount to 1,000,000 Toreador common shares). The Series A-1 Convertible Preferred Stock accrues dividends at an annual rate of $2.25 per share payable quarterly in cash. At any time on or after November 1, 2007, we may elect to redeem for cash any or all shares of Series A-1 Convertible Preferred Stock. The optional redemption price per share is the sum of (1) $25.00 per share of the Series A-1 Convertible Preferred Stock plus (2) any accrued unpaid dividends, and such sum is multiplied by a declining multiplier. The multiplier is 105% until October 31, 2008, 104% until October 31, 2009, 103% until October 31, 2010, 102% until October 31, 2011, 101% until October 31, 2012, and 100% thereafter.

        Prior to the acquisition of Madison, Madison was party to a convertible debenture (“Debenture”) in the amount of $2.16 million payable to PHD Partners LP and due on March 31, 2006. The general partner of PHD Partners LP is a corporation wholly owned by David M. Brewer, a director and significant stockholder of Toreador. The original Debenture bore interest at 10% per annum. As of March 31, 2004, the Debenture was amended and restated to bear interest at 6% per annum, eliminate Madison's right under certain circumstances to force a conversion of the principal into shares of Toreador's common stock and eliminate Madison's ability to repay principal prior to maturity. At the holders’ option, the Debenture can be converted into Toreador common stock at a ratio of $6.75 per share. We have 319,962 common shares reserved for issuance related to the conversion of the Debenture.

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Index

        We anticipate that our 2004 capital expenditures budget, excluding any acquisitions we may make, will be approximately $14.0 to $16.0 million. Capital expenditures through September 30, 2004 were $12.4 million. We intend to fund any remaining amounts to be funded under our capital expenditures budget from operating cash flow, cash currently on hand along with the possible use of debt and other types of financings. We anticipate spending most of our remaining 2004 capital budget on prospects in our foreign inventory. We intend to limit our activity in France to workovers and development drilling on our existing properties and exploration work on the Courtenay permit. In Turkey, we anticipate continuing exploration work on several projects, including an exploratory well on the Calgan prospect, which we will begin to drill in November.

        We expect to receive future cash flow through production from existing producing properties and new producing properties that may be discovered through exploration, as well as development properties from existing fields. In addition to the properties described above, we also may acquire other producing oil and gas assets, which could require the use of debt or other forms of financing.

        Dividends on our common stock may be declared and paid out of funds legally available when and as determined by our board of directors. Our policy is to hold and invest corporate funds on a conservative basis, and, thus, we do not anticipate paying cash dividends on our common stock in the foreseeable future. The terms of our Series A Convertible Preferred Stock and our Series A-1 Convertible Preferred Stock prohibit us from paying dividends on the common stock without the approval of the holders of a majority of the then outstanding shares of the Series A Convertible Preferred Stock and the Series A-1 Convertible Preferred Stock. We are prohibited from paying cash dividends on the common stock without the approval of holders of a majority of the then outstanding Notes.

        Dividends on our Series A Convertible Preferred Stock and Series A-1 Convertible Preferred Stock are paid quarterly. Cash dividends totaling $540,000 and $346,626 were paid for the nine-month periods ended September 30, 2004 and 2003, respectively. Future dividends will be paid in cash at the rate of $180,000 per full calendar quarter. Interest on the Notes issued July 22, 2004 is paid quarterly. Interest paid on the Notes as of September 30, 2004 was $116,115. Future interest will be paid at the rate of $147,188 per full calendar quarter.

        We believe that sufficient funds will be available from operating cash flow, cash on hand and future potential financing sources to meet anticipated capital budget requirements and fund potential acquisitions in 2004. The following table sets forth our contractual obligations at September 30, 2004 for the periods shown:

			Due Within
	Total		1 Year		2 - 3 Years		4 - 5 Years		After 5 Years
Debt		$    9,660		$      —		$    2,160		$    7,500		$        —
Leases		852		72		611		169		—
Total		$    10,512		$    72		$    2,771		$      7,669		$        —

CRITICAL ACCOUNTING POLICIES

        We did not have any changes in our critical accounting policies or in our significant accounting estimates during the nine months ended September 30, 2004. Please see our Annual Report on Form 10-K for the year ended December 31, 2003, for a detailed discussion of our critical accounting policies.

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Index

RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

The following tables present production and average unit prices and costs for the geographic segments indicated:

	Three Months Ended September 30,			Three Months Ended September 30,
	2004	2003		2004		2003
Production			Average Price
Oil (MBbls):			Oil ($/Bbl):
United States	16	46	United States	$     42	.42	$   27	.60
France	108	96	France	38	.32	27	.33
Turkey	20	25	Turkey	34	.37	25	.83
Total	144	167	Total	$     38	.24	$   27	.17
Gas (MMcf):			Gas ($/Mcf):
United States	154	352	United States	$       5	.24	$     4	.68
France	—	—	France		—		—
Turkey	—	—	Turkey		—		—
Total	154	352	Total	$       5	.24	$     4	.68
MBOE:			$/BOE:
United States	41	105	United States	$     35	.65	$   27	.86
France	108	96	France	38	.32	27	.33
Turkey	20	25	Turkey	34	.37	25	.83
Total	169	226	Total	$     37	.21	$   27	.41

REVENUES

        Oil and gas sales. Oil and natural gas sales, net of hedging gains and losses, remained constant at $5.6 million from third quarter 2003 to third quarter 2004. French production increased because the Charmottes 109 well was producing for the full quarter, while U.S. production decreased due to the Royalty Sale and Turkish production decreased due to natural decline. For the third quarter 2004, sales were $6.4 million versus $4.6 million for the third quarter 2003. The average realized oil price for the third quarter of 2004 was $38.24 per barrel versus $27.17 per barrel for the year-ago period. The average realized gas price in the third quarter of 2004 was $5.24 per thousand cubic feet (Mcf) versus $4.68 per Mcf in the third quarter of 2003.

        Lease bonuses and rentals. We had no lease bonuses and rentals for the third quarter of 2004 due to the Royalty Sale in January 2004, compared with $4,000 recorded in the third quarter of 2003.

EXPENSES

        Lease operating. Lease operating expenses decreased $651,000, or 30%. The reduction is attributable to more cost-efficient operations in France. In addition, an adjustment was made in the third quarter of 2003 to reclassify Turkish production taxes as lease operating expense rather than as a deduction from oil and gas sales.

        Exploration and acquisition. Exploration and acquisition expenses for the third quarter of 2004 were $432,000, 5% higher than exploration and acquisition expenses of $413,000 in the third quarter of 2003 due to dry hole and exploratory costs in the United States.

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Index

        Depreciation, depletion and amortization. Third-quarter 2004 depreciation, depletion and amortization expenses increased $74,000, or 8%, compared with the same period last year due to additions to oil and gas properties.

        General and administrative. General and administrative expenses increased $373,000, or 53%, for the third quarter of 2004, compared with the third quarter of 2003. The quarter-to-quarter increase is the result of 2003 general and administrative costs of $458,000 being allocated to income from discontinued operations. The total costs, including amounts classified as discontinued operations, were $1.1 million for the third quarter of 2004, compared with $1.2 million for the third quarter of 2003. Overall general and administrative costs were slightly lower on a quarterly comparative basis.

OTHER INCOME AND EXPENSE

        Other income and expense resulted in a net charge to expense of $120,000 for the third quarter of 2004 versus a net charge to expense of $185,000 for the third quarter of 2003. Other income increased $65,000, or 35%, in the third quarter of 2004, primarily due to increased equity in gains of unconsolidated investments compared with the third quarter of 2003.

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Index

DISCONTINUED OPERATIONS

        The following table compares discontinued operations for the third quarters ended September 30, 2004 and 2003:

	Three Months Ended September 30,
	2004		2003
	(in thousands)
Revenues:
Oil and gas sales	$         18		$ 1,307
Lease bonuses and rentals	—		95
Total revenues	18		1,402
Costs and expenses:
Lease operating	(23	)	165
Depreciation, depletion and amortization	—		116
General and administrative	—		458
Interest	—		141
Total cost and expenses	(23	)	880
Loss on sale of properties	—		—
Income before taxes	41		522
Income tax provision (benefit)	(40	)	146
Income from discontinued operations	$ 81		$ 376

        Income from discontinued operations for the third quarter 2004 was $81,000 versus $376,000 for the third quarter of 2003. The decrease was due to the Royalty Sale in January 2004 (see Note 2 in Notes to Consolidated Financial Statements).

NET INCOME AVAILABLE TO COMMON SHARES

        For the third quarter of 2004, we reported income before taxes of $1.4 million, compared with income before taxes of $1.2 million for the same period in 2003. Third-quarter 2004 income applicable to common shares was $1.7 million versus income applicable to common shares of $946,000 for the third quarter of 2003.

OTHER COMPREHENSIVE INCOME

        This item should be read in conjunction with Note 3 in the Notes to Consolidated Financial Statements included in this filing.

        The most significant element of comprehensive income, other than net income, is foreign currency translation. The functional currency of our operations in France is the Eurodollar, and in Turkey, the functional currency is the Turkish lira. The exchange rates used to translate the financial position of those operations at September 30, 2004, were approximately US$1.24 per Eurodollar and US$0.67 per million Turkish lira. The exchange rates at September 30, 2003, were US$1.15 per Eurodollar and US$0.73 per million Turkish lira.

18

Index

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

The following tables present production and average unit prices and costs for the geographic segments indicated:

	Nine Months Ended September 30,			Nine Months Ended September 30,
	2004	2003		2004		2003
Production			Average Price
Oil (MBbls):			Oil ($/Bbl):
United States	53	142	United States	$     35	.99	$   27	.95
France	291	284	France	33	.55	25	.66
Turkey	55	83	Turkey	30	.03	26	.01
Total	399	509	Total	$     33	.44	$   26	.35
Gas (MMcf):			Gas ($/Mcf):
United States	421	1,202	United States	$       5	.58	$     5	.01
France	—	—	France		—		—
Turkey	—	—	Turkey		—		—
Total	421	1,202	Total	$       5	.58	$     5	.01
MBOE:			$/BOE:
United States	124	342	United States	$     34	.56	$   29	.18
France	291	284	France	33	.55	25	.66
Turkey	55	83	Turkey	30	.03	26	.01
Total	470	709	Total	$     33	.40	$   27	.40

REVENUES

        Oil and gas sales. Oil and natural gas sales, net of hedging gains and losses, increased $1.7 million for the nine months ended September 30, 2004, from the first nine months of 2003. French production increased due to the addition of the Charmottes 109 well, and U.S. production decreased due to the Royalty Sale in January 2004. For the nine months ended September 30, 2004, sales, net of hedging gains and losses, were $14.6 million versus $13.6 million for the nine months ended September 30, 2003. The average realized oil price for the nine months ended September 30, 2004, was $33.44 per barrel versus $26.35 per barrel for the year-ago period. The average realized gas price for the nine months ended September 30, 2004, was $5.58 per thousand cubic feet (Mcf) versus $5.01 per Mcf for the nine months ended September 30, 2003.

        Lease bonuses and rentals. Lease bonuses and rentals were $14,000 for the nine months ended September 30, 2004 and $18,000 for the nine months ended September 30, 2003. The decrease was due to the Royalty Sale in January 2004.

EXPENSES

        Lease operating. Lease operating expenses were $1.6 million, a 30% reduction from the year-ago period. Lower workover expenses in the United States were offset by continuing workover expenses in France, as well as the increase in the value of the Eurodollar against the U.S. dollar since September 30, 2003.

        Exploration and acquisition. Exploration and acquisition expenses for the nine months ended September 30, 2004 were $984,000, 21% higher than exploration and acquisition expenses of $812,000 for the nine months ended September 30, 2003, due to the expensing of two dry holes in the United States.

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Index

        Depreciation, depletion and amortization. Depreciation, depletion and amortization expenses for the nine months ended September 30, 2004 rose $155,000, or 6%, due to additions to oil and gas properties.

        General and administrative. General and administrative expenses increased $1.0 million, or 38%, for the nine months ended September 30, 2004, compared with the nine months ended September 30, 2003. The year-to-year increase was the result of the reclassification of $1.6 million of 2003 general and administrative costs as a charge against income from discontinued operations. Total costs, including amounts classified as discontinued operations, were $3.8 million for the nine months ended September 30, 2004, compared with $4.2 million for the nine months ended September 30, 2003. Overall general and administrative costs were 10% lower on a period-to-period comparative basis, primarily as a result of the reduction in force.

OTHER INCOME AND EXPENSE

        Other income and expense resulted in a net credit to income of $3.8 million for the nine months ended September 30, 2004, versus a net credit to income of $174,000 for the nine months ended September 30, 2003. Other income increased $3.6 million primarily due to a realized foreign currency exchange gain. The gain related to the increase in value of the Eurodollar against the U.S. dollar in connection with the discharge of the Barclays Facility during the nine months ended September 30, 2004.

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Index

DISCONTINUED OPERATIONS

        The following table compares discontinued operations for the nine months ended September 30, 2004 and 2003:

	Nine Months Ended September 30,
	2004		2003
	(in thousands)
Revenues:
Oil and gas sales	$         104		$ 4,585
Lease bonuses and rentals	—		285
Total revenues	104		4,870
Costs and expenses:
Lease operating	(14	)	522
Depreciation, depletion and amortization	—		511
General and administrative	18		1,562
Interest	305		463
Total cost and expenses	309		3,058
Gain on sale of properties	28,736		—
Income before taxes	28,531		1,812
Income tax provision	10,177		506
Income from discontinued operations	$ 18,354		$ 1,306

        Income from discontinued operations for the nine months ended September 30, 2004 was $18.4 million versus $1.3 million for the same period in 2003. The increase was due to the Royalty Sale in January 2004 (see Note 2 in Notes to Consolidated Financial Statements).

NET INCOME AVAILABLE TO COMMON SHARES

        For the nine months ended September 30, 2004, we reported income before taxes of $6.0 million, compared with income before taxes of $2.1 million for the same period in 2003. Income applicable to common shares for the nine months ended September 30, 2004 was $24.7 million versus $2.1 million for the same period of 2003.

OTHER COMPREHENSIVE INCOME

        This item should be read in conjunction with Note 3 in the Notes to Consolidated Financial Statements included in this filing.

        The most significant element of comprehensive income, other than net income, is foreign currency translation. As of December 31, 2003, we had accumulated an unrealized gain of $4.9 million because the Barclays Facility was denominated in U.S. dollars, whereas the functional currency of our operations in France is the Eurodollar. In the first quarter of 2004, we converted this gain from unrealized to realized due to the repayment of the facility. In Turkey, the functional currency is the Turkish lira. The exchange rates used to translate the financial position of those operations at September 30, 2004, were approximately US$1.24 per Eurodollar and US$0.67 per million Turkish lira. The exchange rates at September 30, 2003, were US$1.15 per Eurodollar and US$0.73 per million Turkish lira.

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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

        There have been no material changes from the information provided in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2003.

ITEM 4 – CONTROLS AND PROCEDURES

        The term “disclosure controls and procedures” is defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission. Our management, including our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective in all material respects as of the end of the period covered by this quarterly report.

        There were no changes to our internal control over financial reporting during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

        There have been no material changes to the information reported under Item 3 – Legal Proceedings of our Annual Report on Form 10-K for the year ended December 31, 2003.

        From time to time, we are named as a defendant in other legal proceedings arising in the normal course of business. In our opinion, the final judgment, or settlement, if any, which may be awarded with any other suits or claims would not have a material adverse effect on our financial position.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

        In July 2004, we sold to certain institutional investors pursuant to a private offering $7.5 million aggregate principal amount of Convertible Subordinated Notes (the “Notes”) due June 30, 2009. The Notes bear interest at the rate of 7.85% per annum and are convertible into shares of common stock at a conversion price of $8.20 per share. The Company may force conversion of the Notes on or after January 22, 2005, if the closing price of Toreador’s common stock is greater than $14.35 for the 30 consecutive trading days prior to the date of the Company’s conversion notice. Toreador may also elect to prepay the Notes at any time for the outstanding principal amount plus a 2% premium and accrued and unpaid interest and the issuance of warrants exercisable into the same number of shares of common stock as the Notes were convertible into before the prepayment and retirement of the Notes at an exercise price equal to the conversion price immediately prior to the prepayment and retirement of the Notes. The sale was made to accredited investors pursuant to Rule 506 promulgated pursuant to the Securities Act of 1933, as amended. We intend to use the net proceeds of the offering to accelerate our oil development program in France’s Paris Basin and for general corporate purposes. We are prohibited from paying cash dividends on the common stock without the approval of the holders of a majority of the then outstanding Notes.

        In addition, in July 2004, pursuant to our engagement letters with our investment bankers, we issued to our investment bankers warrants exercisable into an aggregate of 40,000 shares of common stock at an exercise price of $8.20 per share. The warrants were issued to accredited investors pursuant to Rule 506 promulgated pursuant to the Securities Act of 1933, as amended.

ITEM 3 – DEFAULT UPON SENIOR SECURITIES – None

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None

ITEM 5 – OTHER INFORMATION – None

ITEM 6 – EXHIBITS

          (a)     The following exhibits are included herein:

2.1         - Agreement for Purchase and Sale by and among Toreador Resources Corporation and Tormin, Inc., as Sellers, and Black Stone Acquisitions Partners I, L.P., as Buyer, dated December 17, 2003 (previously filed as Exhibit 2.1 to Toreador Resources Corporation Current Report on Form 8-K filed with the Securities and Exchange Commission on January 28, 2004, File No. 0-2517, and incorporated herein by reference).

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3.1         - Amended and Restated Certificate of Incorporation, of Toreador Resources Corporation (previously filed as Exhibit 3.1 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 0-2517, and incorporated herein by reference).

3.2         - Second Amended and Restated Bylaws of Toreador Resources Corporation (previously filed as Exhibit 3.2 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 0-2517, and incorporated herein by reference).

3.3         - Certificate of Designation of Series A-1 Convertible Preferred Stock of Toreador Resources Corporation, dated October 30, 2002 (previously filed as Exhibit 3.1 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, File No. 0-2517, and incorporated herein by reference).

10.1        - Purchase Agreement, dated July 20, 2004, executed by and between Toreador Resources Corporation and each of the investors specified therein (previously filed as Exhibit 10.1 to Toreador Resources Corporation Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2004, File No. 0-2517, and incorporated herein by reference).

10.2        - Form of 7.85% Convertible Subordinated Note (previously filed as Exhibit 10.2 to Toreador Resources Corporation Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2004, File No. 0-2517, and incorporated herein by reference).

31.1*        - Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*        - Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*        - Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

        * Filed herewith.

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TOREADOR RESOURCES CORPORATION, Registrant
November 15, 2004	/s/ G. Thomas Graves III
	G. Thomas Graves III
	President and Chief Executive Officer
November 15, 2004	/s/ Douglas W. Weir
	Douglas W. Weir
	Senior Vice President and Chief Financial Officer

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EXHIBITS INDEX

  Exhibit Number                                                                 Description                                                            

2.1         - Agreement for Purchase and Sale by and among Toreador Resources Corporation and Tormin, Inc., as Sellers, and Black Stone Acquisitions Partners I, L.P., as Buyer, dated December 17, 2003 (previously filed as Exhibit 2.1 to Toreador Resources Corporation Current Report on Form 8-K filed with the Securities and Exchange Commission on January 28, 2004, File No. 0-2517, and incorporated herein by reference).

3.1         - Amended and Restated Certificate of Incorporation Toreador Resources Corporation (previously filed as Exhibit 3.2 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 0-2517, and incorporated herein by reference).

3.2         - Second Amended and Restated Bylaws of Toreador Resources Corporation, (previously filed as Exhibit 3.2 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 0-2517, and incorporated herein by reference).

3.3         - Certificate of Designation of Series A-1 Convertible Preferred Stock of Toreador Resources Corporation, dated October 30, 2002 (previously filed as Exhibit 3.1 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, File No. 0-2517, and incorporated herein by reference).

10.1        - Purchase Agreement, dated July 20, 2004, executed by and between Toreador Resources Corporation and each of the investors specified therein (previously filed as Exhibit 10.1 to Toreador Resources Corporation Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2004, File No. 0-2517, and incorporated herein by reference).

10.2        - Form of 7.85% Convertible Subordinated Note (previously filed as Exhibit 10.2 to Toreador Resources Corporation Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2004, File No. 0-2517, and incorporated herein by reference).

31.1*        - Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*        - Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*        - Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

        * Filed herewith.

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