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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 ended September 30, 2003

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)

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

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 18, 2003   
Common Stock, $0.15625 par value 9,337,517 shares


TOREADOR RESOURCES CORPORATION

INDEX

   Page Number
 
  PART I. FINANCIAL INFORMATION  
       
       Item 1. Financial Statements (Unaudited)
             
           Consolidated Balance Sheets (Unaudited) 1 
                September 30, 2003 and December 31, 2002     
       
           Consolidated Statements of Operations (Unaudited) 2 
                Three and Nine Months Ended September 30, 2003 and 2002    
             
           Consolidated Statements of Cash Flows (Unaudited) 3 
                Nine Months Ended September 30, 2003 and 2002    
       
           Notes to Consolidated Financial Statements 4 
             
       Item 2. Management's Discussion and Analysis of Financial Condition and 14 
                Results of Operations            
       
       Item 3. Quantitative and Qualitative Disclosure about Market Risk 21 
         
       Item 4. Controls and Procedures 21 
  
  PART II. OTHER INFORMATION
         
       Item 1. Legal Proceedings 22 
         
       Item 2. Changes in Securities and Use of Proceeds 22 
         
       Item 3. Defaults Upon Senior Securities 22 
         
       Item 4. Submission of Matters to a Vote of Security Holders 22 
         
       Item 5. Other Information 22 
         
       Item 6. Exhibits and Reports on Form 8-K 23 
         
       Signatures 25 
         
       Exhibit Index 26 

TOREADOR RESOURCES CORPORATION

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

September 30,
2003
 December 31,
2002
ASSETS (in thousands, except share data)
Current assets:      
   Cash and cash equivalents  $      619   $      976  
   Accounts and notes receivable  3,809   3,855  
   Income taxes receivable  --   512  
   Available-for-sale, at fair value  32   45  
   Other  1,702   1,444  
     Total current assets  6,162   6,832  
                              
Oil and gas properties, net, using the successful efforts method of accounting  77,301   71,872  
                               
Investments in unconsolidated entities  501   2,239  
Goodwill  5,467   5,467  
Other assets  506   443  
     Total Assets  $ 89,937   $ 86,853  
                              
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities: 
   Accounts payable and accrued liabilities  $   5,838   $   6,865  
   Unrealized loss on commodity derivatives  1,052   1,036  
   Current portion of long-term debt  14,000   6,500  
   Income taxes payable  1,677   --  
     Total current liabilities  22,567   14,401  
                              
Long-term debt  15,473   26,860  
Long-term accrued liabilities  578   880  
Long-term asset retirement obligation  1,625   --  
Deferred tax liability  13,346   12,531  
Convertible debenture  2,160   2,160  
     Total liabilities   55,749   56,832  
                              
Stockholders' equity: 
   Preferred stock, Series A & A-1, $1.00 par value, 4,000,000 shares                         
          Authorized; $5,925,000 liquidation preference 237,000 and 197,000 issued  237   197  
   Common stock, $0.15625 par value, 30,000,000                         
          shares authorized; 10,058,544 shares issued  1,572   1,572  
   Capital in excess of par value  31,470   30,510  
   Retained earnings (deficit)  232   (1,864 )
   Accumulated other comprehensive income  3,211   2,140  
   36,722   32,555  
                              
   Treasury stock at cost: 
        721,027 shares  (2,534 ) (2,534 )
        Total stockholders' equity  34,188   30,021  
        Total Liabilities and Stockholders' Equity  $ 89,937   $ 86,853  


1

TOREADOR RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

Three Months Ended
September 30,
 Nine Months Ended
September 30,
2003
 2002
 2003
 2002
(in thousands, except per share data)
Revenues:          
   Oil and gas sales   $   6,279   $ 5,800   $ 19,691   $ 17,365  
   Gain (loss) on commodity derivatives  644   (1,128 ) (1,514 ) (3,562 )
   Lease bonuses and rentals  99   120   303   621  
     Total revenues  7,022   4,792   18,480   14,424  
                           
Costs and expenses: 
   Lease operating  2,419   1,834   5,845   5,563  
   Exploration and acquisition  413   263   812   712  
   Depreciation, depletion and amortization  996   1,428   2,924   4,601  
   Reduction in force  --   --   466   --  
   General and administrative  1,168   1,728   4,266   5,397  
     Total costs and expenses  4,996   5,253   14,313   16,273  
                           
Operating income (loss)  2,026   (461 ) 4,167   (1,849 )
                           
Other expense 
   Equity in losses of unconsolidated investments   (56 ) (10 ) (6 ) (74 )
   Gain (loss) on sale of properties and other assets   70   (1,082 ) 138   (2,117 )
   Loss on sale of marketable securities  (33 ) --   (33 ) (1 )
   Interest and other income  136   217   963   184  
   Interest expense  (443 ) (658 ) (1,351 ) (1,517 )
     Total other expense  (326 ) (1,533 ) (289 ) (3,525 )
                           
Income (loss) before income taxes  1,700   (1,994 ) 3,878   (5,374 )
Provision (benefit) for income taxes  629   (828 ) 1,435   (1,861 )
Net income (loss)  1,071   (1,166 ) 2,443   (3,513 )
Less: dividends on preferred shares  125   90   347   270  
Income (loss) available to common shares  $     946   $  (1,256 ) $   2,096   $  (3,783 )
Basic income (loss) per share  $    0.10    $   (0.13)   $    0.22   $    (0.40 )
Diluted income (loss) per share  $    0.09    $   (0.13)   $    0.22   $    (0.40 )
Weighted average shares outstanding 
   Basic  9,338   9,338   9,338   9,345  
   Diluted  10,825   9,338   9,344   9,345  


2



TOREADOR RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Nine Months
Ended September 30,
2003
 2002
(in thousands)
Cash flows from operating activities:      
   Net income (loss)  $ 2,443   $(3,513 )
   Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
      Depreciation, depletion and amortization  2,924   4,601  
      Loss (gain) on sale of properties  (138 ) 2,117  
      Unrealized losses on commodity derivatives  16   2,411  
      Equity in losses of unconsolidated investments  6   102  
      Deferred taxes   (193)   (1,174)  
      Other operating activities  48   1  
 Cash flow from operating activities before change in working capital  5,106   4,545  
    Decrease (increase) in operating assets:                         
      Accounts and notes receivable  283   (379 )
      Income taxes receivable  512   (702 )
      Other current assets  (246 ) (1,648 )
      Other assets  (45 ) 44  
    Increase (decrease) in operating liabilities:          
      Accounts payable and accrued liabilities  (190 ) (568 )
      Income taxes payable  1,677   292  
      Other  --   63  
      Net cash provided by operating activities  7,097   1,647  
                  
Cash flows from investing activities:          
   Expenditures for properties and equipment  (4,708 ) (2,147 )
   Proceeds from the sale of properties and equipment  442   4,316  
   Purchase of marketable securities  --   (51 )
   Proceeds from sale of marketable securities  46   215  
      Net cash provided by (used in) investing activities   (4,220 ) 2,333  
                  
Cash flows from financing activities:          
   Payment for debt issuance costs  --   (175 )
   Borrowings under revolving credit arrangements  259   4,207  
   Repayments under revolving credit arrangements  (4,146 ) (9,039 )
   Issuance of preferred stock  1,000   --  
   Payment of preferred dividends  (347 ) (270 )
   Purchase of treasury stock  --   (180 )
      Net cash used in financing activities  (3,234 ) (5,457 )
Net decrease in cash and cash equivalents  (357 ) (1,477 )
Cash and cash equivalents, beginning of period  976   2,155  
Cash and cash equivalents, end of period  $    619   $    678  
                  
Supplemental disclosure of cash flow information:                         
   Cash paid during the period for interest  $    973   $ 1,473  
   Income taxes paid  --        124  
   Asset retirement obligation at January 1, 2003  1,690   --  
   Capitalized asset retirement obligation, net  1,762   --  


3



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 2002 Annual Report on Form 10-K of Toreador Resources Corporation (the “Company, 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 — 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,
2003
 2002
 2003
 2002
Net income (loss)   $ 1,071   $(1,166 ) $2,443   $(3,513 )
Foreign currency translation adjustment  (360 ) 657   1,058   (183 )
Change in fair value of                  
     available-for-sale securities  (5 ) (17 ) 13   (68 )
Comprehensive income (loss)  $    706   $  (526 ) $3,514   $(3,764 )

NOTE 3 — RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

On August 15, 2001, the FASB issued Statement No. 143, Accounting for Asset Retirement Obligations (“Statement 143”). Initiated in 1994 as a project to account for the costs of nuclear decommissioning, the FASB expanded the scope to include similar closure or removal-type costs in other industries that are incurred at any time during the life of an asset. That standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The standard became effective for fiscal years beginning after June 15, 2002. 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.


4



TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

The following tables describe on a pro forma basis our asset retirement liability as if Statement 143 had been adopted on January 1, 2002:

2003
 2002
Asset retirement obligation January 1   $1,690   $2,153  
Asset retirement accretion expense  78   90  
     Less: plugging cost  5   --  
     Less: property sold  1   399  
Asset retirement obligation at Sept. 30  $1,762   $1,844  

Three Months Ended
Sept 30, 2002
 Nine Months Ended
Sept 30, 2002
Net loss, reported   $      (1,166)   $      (3,513)
Less: retirement obligation accretion 
     expense  27   90  
Plus: depreciation on salvage value  --   --  
Net loss pro forma  $      (1,193)   $      (3,603)
Loss per share: 
As reported          
     Basic  $      (0.13)   $      (0.40)  
     Diluted  $      (0.13)   $      (0.40)  
Pro forma 
     Basic  $      (0.14)   $      (0.41)  
     Diluted  $      (0.14)   $      (0.41)  

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. Under previous standards, such costs were recognized in the period in which an entity committed to a plan of disposal. Under Statement 146, the costs are recognized in the period when an actual disposal is under way. Examples of costs included under Statement 146 include one-time termination benefits, costs to consolidate or close facilities and costs to relocate employees. Statement 146 is effective for exit or disposal activities initiated after December 31, 2002. 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. Total severance expense and liability for the nine months ended September 30, 2003, were approximately $466,000 and $348,000, respectively. The following table provides a reconciliation of the liability:

Exit Cost or Disposal Activity
 Amount
           
Employee severance liability June 17, 2003   $466  
   Cost incurred  --  
   Adjustments  --  
   Less: Payroll payments  118  
Severance liability September 30, 2003  $348  

5


TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


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 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:

Three Months Ended
September 30,
 Nine Months Ended
September 30,
2003
 2002
 2003
 2002
Income (loss) available to common shares                    
   As reported       $ 946       $ (1,256 ) $ 2,095       $ (3,783 )
      Stock-based employee compensation                                                        
      expense determined under fair value   
      method, net of tax     (124 )  (104 )  (325 )  (443 )
   Pro forma       $ 822   $ (1,360 ) $ 1,770   $ (4,226 )
Income (loss) available to common shares, basic:                                                     
             As reported        $    0.10      $    (0.13)       $    0.22       $    (0.40)  
             Pro forma        $    0.09      $    (0.15)       $    0.19       $    (0.45)  
Income (loss) available to common shares, diluted:  
            As reported        $    0.09      $    (0.13)       $    0.22       $    (0.40)  
            Pro forma        $    0.07      $    (0.15)       $    0.19       $    (0.45)  

NOTE 4 – 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. Operations in France and Turkey began when we completed our acquisition of Madison on December 31, 2001 (the “Merger”).



6


TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Three Months Ended September 30,
2003
 2002
United
States
 France
 Turkey
 Total
 United
States
 France
 Turkey
 Total
Revenues:                                    
   Oil and gas sales   $ 2,724   $ 2,620   $ 935   $ 6,279   $ 2,670   $ 2,382   $ 748   $ 5,800  
                                             
   Gain (loss) on commodity derivatives    694    (50 )  --    644    (446 )  (682 )  --    (1,128 )
                                             
   Lease bonus and rentals    99    --    --    99    120    --    --    120  
       Total revenues    3,517    2,570    935    7,022    2,344    1,700    748    4,792  
                                             
Cost and expenses:  
   Lease operating    591    1,216    612    2,419    601    997    236    1,834  
   Exploration and acquisition    358    44    11    413    263    --    --    263  
   Depreciation, depletion and                                                                                                                                                                   
         amortization    417    326    253    996    678    466    284    1,428  
   General and administrative    846    187    135    1,168    1,305    167    256    1,728  
       Total costs and expenses    2,212    1,773    1,011    4,996    2,847    1,630    776    5,253  
                                             
Operating income (loss)    1,305    797    (76 )  2,026    (503 )  70    (28 )  (461 )
                                             
Other income (expense)  
   Equity in gains (losses) of                                                                                                                                                                             
          unconsolidated investments    (56 )  --    --    (56 )  (10 )  --    --    (10 )
   Gain (loss) on sale of properties    70    --    --    70    (1,082 )  --    --    (1,082 )
   Loss on sale of marketable securities    (33 )  --    --    (33 )  --    --    --    --  
   Interest and other income (expense)    86    75    (25 )  136    31    180    6    217  
   Interest income (expense)    (318 )  (138 )  13    (443 )  (475 )  (183 )  --    (658 )
       Total other income (expense)      (251 )  (63 )  (12 )  (326 )  (1,536 )  (3 )  6    (1,533 )
                                             
Income (loss) before income tax    1,054    734    88    1,700    (2,039 )  67    (22 )  (1,994 )
                                             
Provision (benefit) for income taxes    390    272    (33 )  629    (828 )  --    --    (828 )
Net income (loss)    664    462    (55 )  1,071    (1,211 )  67    (22 )  (1,166 )
Dividends on preferred shares    125    --    --    125    90    --    --    90  
Total assets (1)   $   89,892   $   29,661   $   11,401   $   89,937   $   91,060   $   24,666   $   9,424   $   85,828  

(1)     Total consolidated assets reflect the effect of intersegment eliminations.



7


TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Nine Months Ended September 30,
2003
 2002
United
States
 France
 Turkey
 Total
 United
States
 France
 Turkey
 Total
Revenues:                                        
  Oil and gas sales   $ 10,234   $ 7,291   $ 2,166   $ 19,691   $ 8,642   $ 6,934   $ 1,789   $ 17,365    
  Gain (loss) on commodity derivatives    (1,162 )  (352 )  --    (1,514 )  (1,612 )  (1,950 )  --    (3,562 )
  Lease bonus and rentals    303    --    --    303    621    --    --    621  
    Total Revenues    9,375    6,939    2,166    18,480    7,651    4,984    1,789    14,424  
Cost and expenses:                                                                                                                                               
  Lease operating    1,646    3,185    1,014    5,845    1,877    3,008    678    5,563  
  Exploration and acquisition    696    44    72    812    712    --    --    712  
  Depreciation, depletion and  
        amortization    1,353    957    614    2,924    2,527    1,359    715    4,601  
  Reduction in force    466    --    --    466    --    --    --    --  
  General and administrative    2,863    904    499    4,266    4,393    417    587    5,397  
    Total costs and expenses    7,024    5,090    2,199    14,313    9,509    4,784    1,980    16,273  
                          
Operating income (loss)    2,351    1,849    (33 )  4,167    (1,858 )  200    (191 )  (1,849 )
                          
Other income (expense)  
  Equity in gains (losses) of                                                                                                                                               
         unconsolidated investments    (6 )  --    --    (6 )  (74 )  --    --    (74 )
  Gain (loss) on sale of properties    138    --    --    138    (2,117 )  --    --    (2,117 )
  Loss on sale of marketable securities    (33 )  --    --    (33 )  (1 )  --    --    (1 )
  Interest and other income (expense)    140    906    (83 )  963    49    115    20    184  
  Interest expense    (972 )  (379 )  --    (1,351 )  (1,030 )  (487 )  --    (1,517 )
    Total other income (expense)    (733 )  527    (83 )  (289 )  (3,173 )  (372 )  20    (3,525 )
                        
Income (loss) before income tax    1,618    2,376    (116 )  3,878    (5,031 )  (172 )  (171 )  (5,374 )
                        
Provision (benefit) for income taxes    598    879    (43 )  1,435    (1,861 )  --    --    (1,861 )
Net income (loss)    1,020    1,497    (73 )  2,443    (3,170 )  (172 )  (171 )  (3,513 )
Dividends on preferred shares    347    --    --    347    270    --    --    270  
Total assets (1)   $ 89,892   $ 29,661   $ 11,401   $ 89,937   $ 91,060   $ 24,666   $ 9,424   $ 85,828  

(1)     Total consolidated assets reflect the effect of intersegment eliminations.



8


TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


NOTE 5 – 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 (i) reduce the effect of the price fluctuations of the commodities we produce and sell; (ii) support our annual capital budgeting and expenditure plans; (iii) protect the amounts required for servicing outstanding debt; and (iv) maximize the funds available under our existing 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. The counterparty of our French transactions is Barclays Capital.

The following table lists our open natural gas derivative contracts as of September 30, 2003. All contracts are based on NYMEX pricing. We estimated the fair value of the option agreement at September 30, 2003, 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)(1)		           Strike Price
per MMBtu		         Fair Value-
Gain/(Loss)
September 30,
2003		        
Swap          Nov    
      2003		         December
      2003		     
      30,000		     
      60,000		     
      $ 3.900		     
      $     (63)
            January    
      2004		         December
      2004		     
      50,000		     
      600,000		     
      $ 3.900		     
      $   (577)
                                              
Put
Option		         Nov    
      2003		         December
      2003		     
      80,000		     
      160,000		     
      $ 3.250		     
      $        1 
            January    
      2004		         December
      2004		     
      50,000		     
      600,000		     
      $ 3.250		     
      $      52 
  
Call
Option		         Nov    
      2003		         December
      2003		     
      80,000		     
      160,000		     
      $ 4.850		     
      $     (76)
            January    
      2004		         December
      2004		     
      50,000		     
      600,000		     
      $ 5.275		     
      $   (332)

           (1)    MMBtu - Million British thermal units.

The following table lists our open crude oil derivative contracts as of September 30, 2003. Our crude oil derivatives will expire at December 31, 2003. We estimated the fair value of the swap agreements based on the difference between the strike prices and the forward index prices for each determination period multiplied by the notional volume for each period.



9


TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Contract
Type		         Effective
Date		         Termination
Date		             Notional
Volume per
Month
(Bbls)		           Aggregate
Volume
(Bbls)		           Strike Price
per Bbl		            Fair Value-
Gain/(Loss)
September 30,
2003		         
Brent
Crude
Swap		         Nov    
      2003		         December
      2003		     
   20,000		     
   40,000		     
  $ 23.108		    
$   (57)

NOTE 6 – LONG-TERM DEBT

On May 9, 2002, we amended our revolving credit facility with Bank of Texas (the “Texas Facility”). The amendment divided the amounts outstanding into two tranches. Tranche A amounted to $18.0 million, and Tranche B represented all amounts outstanding in excess of Tranche A. The amendment required that all amounts outstanding under Tranche B be repaid by July 15, 2002, and called for a monthly penalty of $50,000 if such amounts were not repaid by July 15, 2002. In connection with this amendment, we paid a fee of $100,000. On August 1, 2002, we amended the Texas Facility again. Under the terms of this amendment, Tranche A was increased to $20.0 million, and the due date for Tranche B was extended to November 1, 2002. Additionally, this amendment required no monthly penalty if all amounts under Tranche B were repaid by November 1, 2002. In connection with this amendment, we paid a fee of $75,000. On September 23, 2002, we amended the Texas Facility again. This amendment eliminated the Tranches, set the borrowing base at $19.4 million and calls for monthly principal payments of $150,000 until amended. There was no fee associated with this amendment. At September 30, 2003, there was $17.3 million outstanding under the Texas Facility, and, in accordance with the amendment, we have included $1.8 million under the current portion of long-term debt on the balance sheet.

As part of our Merger with Madison, we became subject to a revolving credit facility between Madison and Barclays Bank, Plc (the “Barclays Facility”) that matures on December 31, 2005, and is secured by the production from our French properties and the stock of Madison Oil Company’s subsidiaries. The Barclays Facility is subject to interest rates based on LIBOR plus 2.5%. Total borrowings are limited to the lesser of the nominal facility amount or a semi-annual borrowing base. In early 2002, Barclays advised us that it intended to withdraw from the reserve-based lending business. As a result of this change in direction by Barclays and the existence of various technical defaults under the Barclays Facility, in 2003 we entered into various waiver agreements with Barclays. Pursuant to the terms of the current Amendment Agreement to the Barclays Facility, we are required to make monthly principal payments through August 2004 equal to the available net cash flow after expenses of our international operations. We are also required to make fee payments monthly in the amount of $25,000 out of international cash flow pursuant to the terms of the Management and Work Fee Letter dated May 19, 2003. Pursuant to the terms of the current Amendment Agreement, Barclays will conduct a borrowing base review in January 2004. If at that borrowing base review, the ratio of relevant net present value to total indebtedness is less than 1.5;1, it will be an event of default under the Barclays Facility.



10


TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Pursuant to the terms of the waiver agreements previously entered into in 2003, we issued to Barclays warrants that are currently exercisable to purchase an aggregate of 400,000 shares of our common stock at an exercise price of $3.50 per share and issued an additional warrant that is exercisable after April 13, 2004 to purchase 100,000 shares of our common stock at an exercise price of $3.52 per share. These warrants have certain registration rights. Under the terms of the Warrant Buyback Letter dated May 19, 2003, Toreador is required to buy the 500,000 outstanding warrants back from Barclays for the sum of $100,000. The buyback is predicated on the final settlement of all obligations relating to the Barclays Facility. Per the terms of the Settlement Fee Letter dated May 19, 2003, we have also agreed to make a final settlement payment of $925,000, less the sum of all payments made to Barclays for interim fees before the final settlement that will be due at the time we extinguish the Barclays Facility. We have also agreed, among other items, to apply certain amounts that may be received by Toreador for the Turkish registered capital repatriation to the repayment of the Barclays Facility. During the first nine months of 2003, we used $2.4 million of our available cash flow to reduce the amounts outstanding under the Barclays Facility.

We have diligently explored and are continuing to explore alternatives to refinance all or part of our existing capital structure, including the Barclays Facility. We are evaluating a number of alternatives to provide funds necessary for the extinguishment of the Barclays Facility, including a structured financing or bridge financing to be provided by a third party, a possible sale of additional equity or debt and a potential sale of a portion of U.S. or French assets. Our intent is that the Barclays Facility will be extinguished in less than twelve months. Accordingly, we have included the entire balance owed to Barclays, $12.2 million, in the current portion of long-term debt on the balance sheet. However, no assurance can be given that any of these alternatives will be available as a means of discharging the Barclays Facility and providing additional working capital.

NOTE 7 – LITIGATION

Karak Petroleum. Madison 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, 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 varying monthly installments payable at the beginning of each month beginning February 2003 and concluding in December 2003. As of September 30, 2003, $265,000 remained to be paid.

Turkish Registered Capital. Under the existing Petroleum Law of Turkey, capital that is invested by foreign companies in projects such as oil and 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 the 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 are accrued related to this contingency. Holders of Madison common stock have the right to receive, in cash or our common stock, 30% of any payments received from the Turkish government for the protection of repatriated capital if the amounts are applied for prior to December 31, 2003, and paid by December 31, 2004. In March 2002, a lower level court ruled in favor of Madison. The ruling was subject to automatic appeal that was heard on December 31, 2002. The appellate court reversed the lower court’s ruling. We have appealed the ruling of the appellate court and expect a hearing no later then the end of December 2003. The current appeal is the last appeal that can be made by either side in this case.



11

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


NOTE 8 – ISSUANCE OF PREFERRED STOCK

On July 26, August 13 and October 20, 2003, 20,000, 20,000 and 34,000 shares of Series A-1 Convertible Preferred Stock were issued for $500,000, $500,000 and $850,000, respectively. The 34,000 shares issued in October 2003 were issued to William I. Lee, a Toreador director, and Wilco Properties Inc., an entity controlled by Mr. Lee. 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 of the shares of Series A-1 Convertible Preferred Stock would amount to 462,500 Toreador common shares). The $4.00 conversion price was higher than the market price of our common stock at the time of issuance. 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. In connection with the securities purchase agreements, the parties entered into registration rights agreements pursuant to which the holder has the right to register for resale the common stock issuable upon conversion of the Series A-1 Convertible Preferred Stock if we register certain of our securities.



12

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,
2003
 2002
 2003
 2002
(in thousands, except per share data)
Basic earnings per share                    
   Numerator:  
     Net income (loss)   $ 1,071   $ (1,166 ) $ 2,443   $ (3,513 )
     Less: dividends on preferred shares    125    90    347    270  
     Income (loss) available to common shares   $ 946   $ (1,256 ) $ 2,096   $ (3,783 )
   Denominator:  
     Common shares outstanding    9,338    9,338    9,338    9,345  
        Basic earnings (loss) per share   $ 0.10   $ (0.13 ) $ 0.22   $ (0.40 )
Diluted earnings per share                                                        
   Numerator:  
     Net income (loss)   $ 1,071   $ (1,166 ) $ 2,443   $ (3,513 )
     Plus interest on debenture net of tax    N/A  (1)  N/A  (1)  N/A  (1)  N/A  (1)
     Less: dividends on preferred shares    N/A    90    347    270  
     Income (loss) available to common shares   $ 1,071   $ (1,256 ) $ 2,096   $ (3,783 )
   Denominator:                                                        
     Common shares outstanding    9,338    9,338    9,338    9,345  
     Common stock options and warrants    6    N/A  (3)  6    N/A  (3)
     Conversion of preferred shares    1,481    N/A  (3)  N/A  (2)  N/A  (3)
     Conversion of debenture    N/A  (1)  N/A  (3)  N/A  (1)  N/A  (3)
     Diluted shares outstanding    10,825    9,338    9,344    9,345  
          Diluted earnings per share   $ 0.09   $ (0.13 ) $ 0.22   $ (0.40 )
  (1)    The conversion of the debenture would have been antidilutive. Therefore, no conversion is assumed for this calculation.
(2)    The conversion of the preferred shares would have been antidilutive. Therefore, no conversion is assumed for this calculation.          
(3)    Due to the net loss for the three-and nine-month periods ended September 30, 2002, there were no dilutive shares.


13


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.

LIQUIDITY AND CAPITAL RESOURCES

This section should be read in conjunction with Notes 6 and 8 in the Notes to Consolidated Financial Statements included in this filing.

For the first nine months of 2003, net cash provided by operations was $7.1 million, compared with $1.6 million for the year-ago period. We continually review the operating results of each of our properties. When we determine properties are underperforming, we attempt remediation and subsequently liquidate them if necessary. During the nine months ended September 30, 2003, we received $0.4 million in proceeds from sales of property and equipment. We expect that cash flow provided by operating activities for the remaining three months of 2003 will be approximately $2.0 million.

We currently have two senior borrowing facilities. First, we have a revolving credit facility with Bank of Texas (the "Texas Facility"), which had permitted borrowings of $17.3 million at September 30, 2003. We are required to make monthly principal payments of $150,000 under the Texas Facility until amended. Accordingly, we have included $1.8 million in the current portion of long-term debt on the balance sheet.

We also have a revolving credit facility with Barclays Bank, Plc (the "Barclays Facility"). Under the Barclays Facility, we had $12.2 million outstanding at September 30, 2003. Barclays previously advised us that it intended to withdraw from the reserve-based lending business and that an absent assumption by third-party lender, we will not be allowed to borrow any additional funds under the Barclays Facility. As a result of this change in direction and the existence of various technical defaults under the Barclays Facility, in 2003 we entered into various waiver agreements with Barclays. Pursuant to the terms of the curent Amendment Agreement to the Barclays Facility, we are required to make monthly principal payments through August 2004 equal to the available net cash flow after expenses of our international operations. We are also required to make fee payments monthly in the amount of $25,000 out of international cash flow pursuant to the terms of the Management and Work Fee Letter dated May 19, 2003. Pursuant to the terms of the current Amendment Agreement, Barclays will conduct a borrowing base review in January 2004. If at that borrowing base review, the ratio of relevant net present value to total indebtedness is less than 1.5;1, it will be an event of default under the Barclays Facility.

14

Pursuant to the terms of the waiver agreements previously entered into in 2003, we have issued to Barclays warrants that are currently exercisable to purchase an aggregate of 400,000 shares of our common stock at an exercise price of $3.50 per share and issued an additional warrant that is exercisable after April 13, 2004 to purchase 100,000 shares of our common stock at an exercise price of $3.52 per share. These warrants have certain registration rights. Under the terms of the Warrant Buyback Letter dated May 19, 2003, Toreador is required to buy the 500,000 outstanding warrants back from Barclays for the sum of $100,000. The buyback is predicated on the final settlement of all obligations relating to the Barclays Facility. Per the terms of the Settlement Fee Letter dated May 19, 2003, we have also agreed to make a final settlement payment of $925,000, less the sum of all payments made to Barclays for interim fees before the final settlement that will be due at the time we extinguish the Barclays Facility. We have also agreed, among other items, to apply certain amounts that may be received by Toreador for the Turkish registered capital repatriation to the repayment of the Barclays Facility. During the first nine months of 2003, we used $2.4 million of our available cash flow to reduce the amounts outstanding under the Barclays Facility.

We have diligently explored and are continuing to explore alternatives to refinance all or part of our existing capital structure, including the Barclays Facility. We are evaluating a number of alternatives to provide funds necessary for the extinguishment of the Barclays Facility, including a structured financing or bridge financing to be provided by a third party, a possible sale of additional equity or debt, and a potential sale of a portion of our U.S. or French assets. Our intent is that the Barclays Facility will be extinguished in less than twelve months. Accordingly, we have included the entire balance owed to Barclays, $12.2 million, in the current portion of long-term debt on the balance sheet. However, no assurance can be given that any of these alternatives will be available as a means of discharging the Barclays Facility and providing additional working capital.

Toreador had 160,000 shares of nonvoting Series A Convertible Preferred Stock outstanding at September 30, 2003. 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 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.

In November 2002 we issued 37,000 shares of nonvoting Series A-1 Convertible Preferred Stock. An additional 40,000 shares were issued in the third quarter of 2003 along with 34,000 shares in October 2003. The 34,000 shares issued in October 2003 were issued to William I. Lee, a Toreador director, and Wilco Properties, Inc., an entity controlled by Mr. Lee. 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 an aggregate of 693,750 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.


15


We anticipate that our 2003 capital expenditures budget, excluding any acquisitions we may make, will be approximately $5.0 million. Capital expenditures through September 30, 2003 were $4.3 million. We intend to fund our capital expenditures budget from operating cash flow. We will continue to spend most of our 2003 capital budget on prospects in our inventory as a result of the acquisition of Madison (the "Merger"). We will limit our activity in France to remedial work on our existing properties. In Turkey, we anticipate exploration work will continue on several projects.

We expect to receive future funds through production from existing producing properties and new producing properties that may be discovered through exploration, along with development properties added to 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, including the Texas Facility 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. In addition, under the terms of the Texas Facility we are prohibited from paying dividends over $100,000 without prior consent from Bank of Texas, National Association (other than dividends payable in shares of common stock). 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.

Dividends on our Series A Convertible Preferred Stock and Series A-1 Convertible Preferred Stock are paid quarterly. Cash dividends totaling $346,626 and $270,000 were paid for the nine-month periods ended September 30, 2003 and 2002, respectively. The first 37,000 shares of the Series A-1 Convertible Preferred Stock were issued on November 1, 2002, and an additional 40,000 and 34,000 shares of the Series A-1 Convertible Preferred Stock were issued in the third quarter 2003 and October 2003, respectively. Future dividends will be paid in cash at the rate of $152,438 per full calendar quarter. We are prohibited from paying dividends over $100,000 without the consent of the Bank of Texas, National Association. Thus, approval will be required prior to the payment of the above-mentioned dividends.

We believe that sufficient funds will be available from operating cash flow to meet anticipated capital requirements for fiscal 2003. The following table sets forth our contractual obligations in thousands at September 30, 2003 for the periods shown:

Due Within
Total
 1 Year
 2 - 3 Years
 4 - 5 Years
 After 5 Years
Debt       $    29,473   $    14,000   $    15,473   $        --   $        --  
Leases      1,396     341     345     375     335  
  Total   $    30,869   $    14,341    $    15,818   $    375   $    335  

CRITICAL ACCOUNTING POLICIES

Other than the adoption of Statement 143 discussed in Note 3 in the Notes to Consolidated Financial Statements included in this filing, we did not have any changes in our critical accounting policies or in our significant accounting estimates during the three months ended September 30, 2003. Please see our Annual Report on Form 10-K for the year ended December 31, 2002, for a detailed discussion of our critical accounting policies.



16


RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

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,
2003
 2002
 2003
 2002
Production       Average Price      
   Oil (MBbls):        Oil($/Bbl):  
     United States   46   56        United States   $     27 .60 $     24 .12
     France   96   100        France   27 .33 23 .75
     Turkey  25   30        Turkey  25 .83 24 .87
        Total   167   186           Total  $     27 .17 $     24 .04
                                               
   Gas (MMcf):               Gas($/Mcf):   
     United States  352   472        United States  $       4 .68 $     2 .66
     France  --   --        France   --   --  
     Turkey  --   --        Turkey   --   --  
        Total  352   472           Total  $       4 .68 $     2 .66
                                               
   MBOE:            $/BOE:  
     United States  105   135        United States  $     27 .51 $     19 .34
     France  96   100        France  27 .33 23 .75
     Turkey  25   30        Turkey  25 .83 24 .87
        Total  226   265           Total  $     27 .25 $     21 .64

REVENUES

Oil and gas sales. Third-quarter 2003 oil and gas sales of $6.3 million rose 8%, or $479,000, compared with oil and gas sales of $5.8 million for the third quarter of 2002. Higher oil and gas prices accounted for the increase. The decline in production was due to the temporary loss of producing wells in which we have interests, as well as property sales during the last six months of 2002. Revenues from the sold properties were included in oil and gas sales for the third quarter of 2002. The production decrease was offset by higher oil and gas prices. The average realized gas price in the third quarter of 2003 was $4.68 per thousand cubic feet (Mcf) versus $2.66 per Mcf in the third quarter of 2002. The average realized oil price for the third quarter of 2003 was $27.17 per barrel versus $24.04 per barrel for the year-ago period.

Gain (loss) on commodity derivatives. We utilize commodity derivative instruments as part of our risk management program. 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 (i) reduce the effect of the price fluctuations of the commodities we produce and sell; (ii) support our annual capital budgeting and expenditure plans; (iii) protect the amounts required for servicing outstanding debt; and (iv) maximize the funds available under our existing 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. The counterparty of our French transactions is Barclays Capital. During the third quarter of 2003, we had an unrealized gain of approximately $888,000 related to hedging activity, as well as realized losses of approximately $244,000. During the third quarter of 2002, we had an unrealized loss of $304,000 and a realized loss of $824,000. As noted above, we have structured our commodity derivatives to reduce the effect of price fluctuations of the commodities we produce and sell. As a result, these derivatives decline in value as the underlying commodity prices rise. Any losses incurred on derivatives are offset by higher actual oil and gas sales revenues due to increased prices for the products. See Note 5 in the Notes to Consolidated Financial Statements included in this filing for more details.



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Lease bonuses and rentals. Third-quarter 2003 lease bonuses and rentals were $99,000, declining $21,000 from third-quarter 2002 lease bonuses and rentals of $120,000. The decrease was due to reduced leasing activity on the minerals we own.

EXPENSES

Lease operating. Lease operating expenses increased $585,000, or 32%, due to workover expenses in France along with an adjustment made to reclassify Turkish production taxes as lease operating expense rather then a deduction from oil and gas sales.

Exploration and acquisition. Exploration and acquisition expenses for the third quarter of 2003 were $413,000, 57% higher than exploration and acquisition expenses of $263,000 in the third quarter of 2002 due to increased evaluation activity on our prospects in Turkey.

Depreciation, depletion and amortization. Third-quarter 2003 depreciation, depletion and amortization expenses decreased $432,000, or 30%, from the third quarter of 2002 due to the sale of U.S. properties in the last six months of 2002 along with a lower unit of production rate than that used in 2002.

General and administrative. General and administrative expenses decreased $560,000, or 32%, for the third quarter of 2003 compared with the third quarter of 2002. A large portion of the general and administrative expense costs in the third quarter of 2002 was attributable to the Madison Merger. Overall general and administrative costs were lower on a quarterly comparative basis due to a reduction in overhead. One of management’s primary objectives is to continue to reduce expenses.

OTHER INCOME AND EXPENSE

Other income and expense resulted in a net charge to expense of $326,000 for the third quarter of 2003 versus a net charge to expense of $1.5 million for the third quarter of 2002. Net expense decreased $1.2 million primarily due to a gain on property sales of $70,000 in the third quarter of 2003 versus a loss of $1.1 million from the sale of properties in the same period of 2002.

NET INCOME (LOSS) AVAILABLE TO COMMON SHARES

For the third quarter of 2003, we reported net income before taxes of $1.7 million, compared with a net loss before taxes of $2.0 million for the same period of 2002. Third-quarter 2003 income applicable to common shares was $946,000 versus a loss applicable to common shares of $1.3 million in the third quarter of 2002.

OTHER COMPREHENSIVE INCOME

This item should be read in conjunction with Note 2 in the Notes to Consolidated Financial Statements included in this filing.

The most significant element of comprehensive income, other than net income (loss), is foreign currency translation. The functional currency of our operations in France is the Euro, 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, 2003, were approximately US$1.151 per Euro and US$0.73 per million Turkish Lira. The Euro rate at June 30, 2003, was US$1.144 per Euro and US$0.71 per million Turkish Lira. These fluctuations caused an unrealized gain of $360,000 for the third quarter of 2003 versus an unrealized loss of $657,000 for the same period of 2002.

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COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

Nine Months Ended
September 30,
 Nine Months Ended
September 30,
2003
 2002
 2003
 2002
Production       Average Price      
   Oil (MBbls):        Oil($/Bbl):  
     United States   142   191        United States   $     27 .95 $     21 .79
     France   284   316        France   25 .66 21 .98
     Turkey  83   82        Turkey  26 .01 21 .74
        Total   509   589           Total  $     26 .35 $     21 .88
                                               
   Gas (MMcf):               Gas($/Mcf):   
     United States  1,202   1,437        United States  $       5 .01 $     2 .89
     France  --   --        France   --   --  
     Turkey  --   --        Turkey   --   --  
        Total  1,202   1,437           Total  $       5 .01 $     2 .89
                                               
   MBOE:            $/BOE:  
     United States  342   430        United States  $     29 .18 $     19 .31
     France  284   316        France  25 .66 21 .98
     Turkey  83   82        Turkey  26 .01 21 .74
        Total  709   828           Total  $     27 .40 $     20 .57

REVENUES

Oil and gas sales. Oil and gas sales for the nine months ended September 30, 2003, rose 13%, or $2.3 million, compared with the same period of 2002. The increase was due to higher oil and gas prices. For the nine months ended September 30, 2003, oil and gas sales were $19.7 million versus $17.4 million for the same period of 2002. The average realized oil prices for the first nine months of 2003 was $26.35 per barrel compared with $21.88 per barrel for the year-earlier period. The average realized gas price for the first nine months of 2003 was $5.01 per Mcf versus $2.89 per Mcf for the first nine months of 2002. For the nine-month 2003 period, overall production declined, the result of the temporary loss of producing wells in which we have interests, natural decline and property sales during the last six months of 2002. Revenues from the sold properties were included in oil and gas sales for the first nine months of 2002.

Gain (loss) on commodity derivatives. We utilize commodity derivative instruments as part of our risk management program. 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 (i) reduce the effect of price fluctuations of the commodities we produce and sell; (ii) support our annual capital budgeting and expenditure plans; (iii) protect the amounts required for servicing outstanding debt; and (iv) maximize funds available under our existing 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. The counterparty of our French transactions is Barclays Capital. During the first nine months of 2003, we had an unrealized loss of approximately $16,000 related to hedging activity, as well as realized losses of approximately $1.5 million. During the first nine months of 2002, we had an unrealized loss of $2.4 million and a realized loss of $1.2 million. As noted above, we have structured our commodity derivatives to reduce the effect of price fluctuations of the commodities we produce and sell. As a result, these derivatives decline in value as the underlying commodity prices rise. Any losses incurred on derivatives are offset by higher actual oil and gas sales revenues due to increased prices for the products. See Note 5 in the Notes to Consolidated Financial Statements included in this filing for more details.


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Lease bonuses and rentals. Nine-month 2003 lease bonuses and rentals were $303,000, declining $318,000 from nine-month 2002 lease bonuses and rentals of $621,000. The decrease was due to a decline in leasing activity on the minerals we own.

EXPENSES

Lease operating. For the first nine months of 2003, lease operating expenses increased $282,000, or 5%, compared with the same period in 2002 due to increased workover costs in France.

Exploration and acquisition. Exploration and acquisition expenses for the first nine months of 2003 rose $100,000 to $812,000 from $712,000 for the first nine months of 2002. The increase was due to greater activity in Turkey and Romania.

Depreciation, depletion and amortization. Depreciation, depletion and amortization expenses for the first nine months of 2003 decreased $1.7 million, or 36%, compared with the year-ago period due to the sale of U.S. properties in the last six months of 2002 along with a lower unit of production rate than that used in 2002.

Reduction in force. In June 2003, Toreador reduced its staff by two engineers, one geologist and one part-time employee. Total severance expense was $466,000.

General and administrative. General and administrative expenses decreased $1.1 million, or 21%, for the nine months ended September 30, 2003, compared with the nine months ended September 30, 2002. A large portion of the general and administrative costs in 2002 was attributable to the Madison Merger. During the first nine months of 2003, legal fees decreased $299,000, professional fees decreased $288,000, and shareholder relations costs decreased $109,000. Salaries declined $368,000 for the first nine months of 2003 versus the first nine months of 2002 due to a reduction in overhead. Management considers further reduction of general and administrative costs to be a high priority.

OTHER INCOME AND EXPENSE

Other income and expense resulted in a net charge to expense of $289,000 for the first nine months of 2003 versus a net charge to expense of $3.5 million for the year-ago period. Net expense decreased $3.2 million primarily due to a gain on property sales of $138,000 for the first nine months of 2003, compared with a $2.1 million loss for the year-earlier period. The remainder of the decrease resulted from foreign currency transaction gains on Barclays Facility payments in U.S. dollars while the Euro increased in value during the period.

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NET INCOME (LOSS) AVAILABLE TO COMMON SHARES

For the nine months ended September 30, 2003, net income before taxes was $3.9 million, compared with a net loss before taxes of $5.4 million for the same period of 2002. For the first nine months of 2003, income applicable to common shares was $2.1 million versus a loss applicable to common shares of $3.8 million for the same period of 2002.

OTHER COMPREHENSIVE INCOME

This item should be read in conjunction with Note 2 in the Notes to Consolidated Financial Statements included in this filing.

The most significant element of comprehensive income, other than net income (loss), is foreign currency translation. The functional currency of our operations in France is the Euro, 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, 2003, were approximately US$1.151 per Euro and US$0.73 per million Turkish Lira. The Euro rate at December 31, 2002, was US$1.0483 per Euro and US$0.62 per million Turkish Lira. These fluctuations resulted in an unrealized gain of $1.1 million for the nine months ended September 30, 2003, versus an unrealized loss of $183,000 for the same period of 2002.

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, 2002.

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 required 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 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 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 Part II. Other Information, Item 1 – Legal Proceedings since our Quarterly Report on Form 10-Q for the quarter ended June 30, 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 – CHANGES IN SECURITIES AND USE OF PROCEEDS

Since July 1, 2003, pursuant to Regulation D promulgated under the Securities Act of 1933, as amended, we have issued the following equity securities that were not registered under the Securities Act of 1933, as amended.

On July 26, August 13 and October 20, 2003, 20,000, 20,000 and 34,000 shares of Series A-1 Convertible Preferred Stock were issued for an aggregate of $1,850,000, to James R. Anderson, Karen Anderson and William I. Lee/Wilco Properties, Inc., respectively. 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 of the 74,000 shares of Series A-1 Convertible Preferred Stock would amount to 462,500 Toreador common shares). The $4.00 conversion price was higher than the market price of our common stock at the time of issuances. 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. In connection with the securities purchase agreements, the parties entered into registration rights agreements pursuant to which the holder has the right to register for resale the common stock issuable upon conversion of the Series A-1 Convertible Preferred Stock if we register certain of our securities.

The terms of our Series A Convertible Preferred Stock and our Series A-1 Convertible Preferred Stock prohibit us from paying dividends on our common stock without the approval of the holders of a majority of the then outstanding shares of Series A Convertible Preferred Stock and the Series A-1 Convertible Preferred Stock.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES – None.

ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS – None.

ITEM 5 – OTHER INFORMATION – None.

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ITEM 6 – EXHIBITS AND REPORTS ON FORM 8-K

(a)              The following exhibits are included herein:

  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).

  4.1 —     Registration Rights Agreement, effective December 16, 1998, among Toreador Royalty Corporation and persons party thereto (previously filed as Exhibit 10.2 to Toreador Royalty Corporation Current Report on Form 8-K filed with the Securities and Exchange Commission on December 31, 1998, File No. 0-2517, and incorporated herein by reference).

  4.2 —     Settlement Agreement dated June 25, 1998, among the Gralee Persons, the Dane Falb Persons and Toreador Royalty Corporation (previously filed as Exhibit 10.1 to Toreador Royalty Corporation Current Report on Form 8-K filed with the Securities and Exchange Commission on July 1, 1998, File No. 0-2517, and incorporated herein by reference).

  4.3 —     Registration Rights Agreement, effective July 31, 2000, among Toreador Royalty Corporation and persons party thereto (previously filed as Exhibit 4.5 to Toreador Resources Corporation Registration Statement on Form S-3, No. 333-52522 filed with the Securities and Exchange Commission on December 22, 2000, File No. 0-2517, and incorporated herein by reference).

  4.4 —     Registration Rights Agreement, effective September 11, 2000, among Toreador Resources Corporation and Earl E. Rossman, Jr., Representative of the Holders (previously filed as Exhibit 4.6 to Toreador Resources Corporation Registration Statement on Form S-3, No. 333-52522, filed with the Securities and Exchange Commission on December 22, 2000, File No. 0-2517, and incorporated herein by reference).

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  4.5 —     Registration Rights Agreement, effective November 1, 2002, among Toreador Resources Corporation and persons party thereto (previously filed as Exhibit 4.5 to Toreador Resources Corporation Annual Report on Form 10-K for the year ended December 31, 2002, File No. 0-2517, and incorporated herein by reference).

  4.6 —     Registration Rights Agreement dated March 25, 2003, between Toreador Resources Corporation and Barclays Bank PLC (previously filed as Exhibit 4.6 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, File No. 0-2517, and incorporated herein by reference).

  4.7 —     Registration Rights Agreement dated July 26, 2003, between Toreador Resources Corporation and James R. Anderson (previously filed as Exhibit 4.7 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, File No. 0-2517, and incorporated herein by reference).

  4.8* —     Registration Rights Agreement dated August 13, 2003, between Toreador Resources Corporation and Karen Anderson.

  4.9* —    Registration Rights Agreement dated October 20, 2003, between Toreador Resources Corporation, William I. Lee and Wilco Properties, Inc.

  10.1 —     Waiver Letter between Madison Energy France S.C.S. (formerly Madison/Chart Energy S.C.S.), Madison Oil Company Europe, Madison Oil France S.A., Madison Oil Company, Madison Petroleum Inc., Madison (Turkey) Inc., Madison Oil Turkey Inc. and Toreador Resources Corporation and Barclays Bank PLC dated August 1, 2003 (previously filed as Exhibit 10.4 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, File No. 0-2517, and incorporated herein by reference).

  10.2* —    Amendment Agreement between Madison Energy France S.C.S. (formerly Madison/Chart Energy S.C.S.), Madison Oil Company Europe, Madison Oil France S.A., Madison Oil Company, Madison Petroleum Inc., Madison (Turkey) Inc., Madison Oil Turkey Inc. and Toreador Resources Corporation and Barclays Bank PLC dated November 19, 2003.

  10.3 —     Securities Purchase Agreement by and between Toreador Resources Corporation and James R. Anderson dated July 26, 2003 (previously filed as Exhibit 10.8 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, File No. 0-2517, and incorporated herein by reference).

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  10.4* —    Securities Purchase Agreement by and between Toreador Resources Corporation and Karen Anderson dated August 13, 2003.

  10.5*—     Securities Purchase Agreement by and between Toreador Resources Corporation, William I. Lee and Wilco Properties, Inc. dated October 20, 2003.

  10.6* —    First Amendment to Warrant No. 025 dated August 14, 2003, issued by Toreador Resources Corporation in favor of Barclays Bank PLC.

  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.

  (b) Reports on Form 8-K:
On September 26, 2003, we filed a Form 8-K relating to the changing of accountants from Ernst & Young, LLP to Hein + Associates LLP. On October 8, 2003, we filed an amendment to that Form 8-K providing additional information regarding the change.

 

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 19, 2003      /s/ G. Thomas Graves III        
      G. Thomas Graves III
      President and Chief Executive Officer
        
November 19, 2003   /s/ Douglas W. Weir        
      Douglas W. Weir
      Senior Vice President and Chief Financial Officer

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EXHIBITS INDEX
  Exhibit Number                                                                                        Description                                                                      
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).

4.1        —     Registration Rights Agreement, effective December 16, 1998, among Toreador Royalty Corporation and persons party thereto (previously filed as Exhibit 10.2 to Toreador Royalty Corporation Current Report on Form 8-K filed with the Securities and Exchange Commission on December 31, 1998, File No. 0-2517, incorporated herein by reference).

4.2        —     Settlement Agreement dated June 25, 1998, among the Gralee Persons, the Dane Falb Persons and Toreador Royalty Corporation (previously filed as Exhibit 10.1 to Toreador Royalty Corporation Current Report on Form 8-K filed with the Securities and Exchange Commission on July 1, 1998, File No. 0-2517, and incorporated herein by reference).

4.3        —     Registration Rights Agreement, effective July 31, 2000, among Toreador Royalty Corporation and persons party thereto (previously filed as Exhibit 4.5 to Toreador Resources Corporation Registration Statement on Form S-3, No. 333-52522 filed with the Securities and Exchange Commission on December 22, 2000, and incorporated herein by reference).

4.4        —     Registration Rights Agreement, effective September 11, 2000, among Toreador Resources Corporation and Earl E. Rossman, Jr., Representative of the Holders (previously filed as Exhibit 4.6 to Toreador Resources Corporation Registration Statement on Form S-3, No. 333-52522, filed with the Securities and Exchange Commission on December 22, 2000, and incorporated herein by reference).

4.5        —     Registration Rights Agreement, effective November 1, 2002, among Toreador Resources Corporation and persons party thereto (previously filed as Exhibit 4.5 to Toreador Resources Corporation Annual Report on Form 10-K for the year ended December 31, 2002, File No. 0-2517, and incorporated herein by reference).

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4.6        —     Registration Rights Agreement dated March 25, 2003, between Toreador Resources Corporation and Barclays Bank PLC (previously filed as Exhibit 4.6 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, File No. 0-2517, and incorporated herein by reference).

4.7        —     Registration Rights Agreement dated July 26, 2003, between Toreador Resources Corporation and James R. Anderson previously filed as Exhibit 4.7 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, File No. 0-2517, and incorporated herein by reference.

4.8*        —     Registration Rights Agreement dated August 13, 2003, between Toreador Resources Corporation and Karen Anderson.

4.9*        —     Registration Rights Agreement dated October 20, 2003, between Toreador Resources Corporation, William I. Lee and Wilco Properties, Inc.

10.1        —     Waiver Letter between Madison Energy France S.C.S. (formerly Madison/Chart Energy S.C.S.), Madison Oil Company Europe, Madison Oil France S.A., Madison Oil Company, Madison Petroleum Inc., Madison (Turkey) Inc., Madison Oil Turkey Inc. and Toreador Resources Corporation and Barclays Bank PLC dated August 1, 2003 (previously filed as Exhibit 10.4 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, File No. 0-2517, and incorporated herein by reference).

10.2*        —     Amendment Agreement between Madison Energy France S.C.S. (formerly Madison/Chart Energy S.C.S.), Madison Oil Company Europe, Madison Oil France S.A., Madison Oil Company, Madison Petroleum Inc., Madison (Turkey) Inc., Madison Oil Turkey Inc. and Toreador Resources Corporation and Barclays Bank PLC dated November 19, 2003.

10.3        —     Securities Purchase Agreement by and between Toreador Resources Corporation and James R. Anderson dated July 26, 2003 (previously filed as Exhibit 10.8 to Toreador Resources Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, File No. 0-2517, and incorporated herein by reference).

10.4*        —     Securities Purchase Agreement by and between Toreador Resources Corporation and Karen Anderson dated August 13, 2003.

10.5*        —     Securities Purchase Agreement by and between Toreador Resources Corporation, William I. Lee and Wilco Properties, Inc. dated October 20, 2003.

10.6*        —     First Amendment to Warrant No. 025 dated August 14, 2003, issued by Toreador Resources Corporation in favor of Barclays Bank PLC.

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.

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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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