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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-Q

ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended: September 30, 2009o

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


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)

(I.R.S. Employer
Identification Number)


13760 Noel Road, Suite 1100
Dallas, Texas 75240(Address of principal executive office)

Registrant's
telephone number, including area code:33 1 47 03 34 24

Indicate
by check mark whether the Registrant (i) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the Registrant was required to file such reports), and (ii) has been subject to such filing requirements for the past 90 days.
Yes ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes o    No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a
smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No ý

As of November 5, 2009, there were 21,456,153 shares of common stock, par value $.15625 per share, outstanding.



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Table of Contents

TOREADOR RESOURCES CORPORATION

TABLE OF CONTENTS



PagePART I. FINANCIAL INFORMATIONItem 1.

Financial Statements (unaudited)Consolidated Balance SheetsSeptember 30, 2009 and December 31, 2008

1Consolidated Statements of Operationsfor the three months ended September 30, 2009 and
2008

2Consolidated Statements of Operationsfor the nine months ended September 30, 2009 and
2008

3Consolidated Statements of Cash Flowsfor the nine months ended September 30, 2009 and
2008

4Notes to Consolidated Financial Statements

5Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

26Item 3.

Quantitative and Qualitative Disclosures About Market Risk

48Item 4.

Controls and Procedures

48PART II. OTHER INFORMATIONItem 1.

Legal Proceedings

49Item 1A.

Risk Factors

49Item 6.

Exhibits

49SIGNATURES

50


i

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PART I. FINANCIAL INFORMATION        TOREADOR RESOURCES CORPORATION        CONSOLIDATED BALANCE SHEETS

September 30,
2009

December 31,
2008(Unaudited)(In thousands, except share
and per share data)ASSETSCurrent assets:Cash and cash equivalents

$
10,626

$
14,860Accounts receivable


2,734


1,057Oil and natural gas properties, net, held for sale


16,507


91,958Other assets held for sale


15,371


14,963Other


3,705


3,713Total current assets


48,943


126,551Oil and natural gas properties, net, using successful efforts method of accounting


73,157


72,753Investments


200


200Goodwill


4,038


3,838Other assets


3,007


3,814$
129,345

$
207,156LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable and accrued liabilities

$
9,149

$
7,700Liabilities held for sale


2,764


11,366Deferred lease payable


106


93Current portion of long-term debt





30,000Income taxes payable





4,223Total current liabilities


12,019


53,382Long-term accrued liabilities


197


501Deferred lease payable


471


550Asset retirement obligations


6,758


6,037Deferred income tax liabilities


14,812


13,851Convertible senior notes


63,592


80,275Total liabilities


97,849


154,596Commitments and contingenciesStockholders' equity:Common stock, $0.15625 par value, 30,000,000 shares authorized; 22,206,680 and 20,984,360 shares issued


3,470


3,279Additional paid-in capital


160,782


166,484Accumulated deficit


(162,428
)

(151,169
)Accumulated other comprehensive income


32,206


36,500Treasury stock at cost, 721,027 shares


(2,534
)

(2,534
)Total stockholders' equity


31,496


52,560$
129,345

$
207,156


The accompanying notes are an integral part of these financial statements.

1

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TOREADOR RESOURCES CORPORATION        CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended
September 30,2009

2008(Unaudited)(In thousands, except
per share data)Oil sales

$
5,204

$
9,641Operating costs and expenses:Lease operating


1,468


2,327Exploration expense


22


170Depreciation, depletion and amortization


1,393


1,196General and administrative


4,136


2,207Gain on oil and gas derivative contracts


(7
)

(2,405
)Total operating costs and expenses


7,012


3,495Operating income (loss)


(1,808
)

6,146Other income (expense):Foreign currency exchange gain (loss)


1


(17
)Gain on early extinguishment of debt





368Interest and other income


250


196Interest expense, net of interest capitalized


(616
)

(1,109
)Total other income (expense)


(365
)

(562
)Income (loss) before taxes


(2,173
)

5,584Income tax (benefit) provision


(232
)

1,787Income (loss) from continuing operations, net of income taxes


(1,941
)

3,797Loss from discontinued operations, net of income taxes


(10,518
)

(3,727
)Income (loss) available to common shares

$
(12,459
)
$
70Basic income (loss) available to common shares per share:From continuing operations, net of income taxes

$
(0.09
)
$
0.19From discontinued operations, net of income taxes


(0.50
)

(0.19
)$
(0.59
)
$
0.00Diluted income (loss) available to common shares per share:From continuing operations, net of income taxes

$
(0.09
)
$
0.19From discontinued operations, net of income taxes


(0.50
)

(0.19
)$
(0.59
)
$
0.00Weighted average shares outstanding:Basic


20,869


19,929Diluted


20,869


19,930


The
accompanying notes are an integral part of these financial statements.

2

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TOREADOR RESOURCES CORPORATION        CONSOLIDATED STATEMENTS OF OPERATIONS

Nine Months Ended
September 30,2009

2008(Unaudited)(In thousands, except
per share data)Oil sales

$
13,096

$
29,478Operating costs and expenses:Lease operating


5,029


6,855Exploration expense


130


918Depreciation, depletion and amortization


4,536


3,490General and administrative


14,663


10,574(Gain) loss on oil and gas derivative contracts


(7
)

1,806Gain on sale of properties and other assets


(121
)

Impairment of oil and gas properties





2,282Total operating costs and expenses


24,230


25,925Operating loss


(11,134
)

3,553Other income (expense):Foreign currency exchange gain


131


977Gain on the early extinguishment of debt


3,370


368Interest and other income


726


598Interest expense, net of interest capitalized


(2,559
)

(3,122
)Total other (expense) income


1,668


(1,179
)Income (loss) before taxes


(9,466
)

2,374Income tax (benefit) provision


(1,002
)

6,270Loss from continuing operations, net of income taxes


(8,464
)

(3,896
)Loss from discontinued operations, net of income taxes


(11,988
)

(66,228
)Loss available to common shares

$
(20,452
)
$
(70,124
)Basic loss available to common shares per share:From continuing operations, net of income taxes

$
(0.41
)
$
(0.20
)From discontinued operations, net of income taxes


(0.59
)

(3.35
)$
(1.00
)
$
(3.55
)Diluted loss available to common shares per share:From continuing operations, net of income taxes

$
(0.41
)
$
(0.20
)From discontinued operations, net of income taxes


(0.59
)

(3.35
)$
(1.00
)
$
(3.55
)Weighted average shares outstanding:Basic


20,428


19,776Diluted


20,428


19,776


The
accompanying notes are an integral part of these financial statements.

3

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TOREADOR RESOURCES CORPORATION        CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended
September 30,2009

2008(Unaudited)(In thousands)Cash flows from operating activities:Net loss

$
(20,452
)
$
(70,124
)Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation, depletion and amortization


4,693


29,953Stock based compensation


3,909


1,859Deferred income taxes benefit


679


(1,546
)Dry hole costs


1,318


Impairment of oil and natural gas properties


10,725


55,461Impairment of investments





300Gain on sale of properties and other assets


(121
)

Gain on sale of discontinued operations


(1,675
)

Gain on early extinguishment of debtconvertible notes


(3,370
)

(368
)Loss on early extinguishment of debtrevolving credit facility


4,881


Increase in accounts receivable


(1,677
)

(238
)Decrease in other current assets


8


1,020Decrease in other assets


155


235Increase in other assets held for sale


(1,299
)

(758
)Increase (decrease) in accounts payable and accrued liabilities


1,080


(131
)Increase (decrease) in income taxes payable


(4,223
)

5,148Increase (decrease) in liabilities held for sale


(5,797
)

1,700Net cash provided by (used in) operating activities


(11,166
)

22,511Cash flows from investing activities:Proceeds from sale of property and equipment


121


Expenditures for property and equipment


(4,521
)

(9,729
)Proceeds from sale of oil and gas properties


60,418


Net cash provided by (used in) investing activities


56,018


(9,729
)Cash flows from financing activities:Repayment of convertible notes


(12,661
)

(4,909
)Repayment of revolving credit facility


(36,372
)

Proceeds from issuance of common stock


(49
)

745Net cash used in financing activities


(49,082
)

(4,164
)Net (decrease) increase in cash and cash equivalents


(4,230
)

8,618Effects of foreign currency translation on cash and cash equivalents


(4
)

(2,457
)Cash and cash equivalents, beginning of period


14,860


8,403Cash and cash equivalents, end of period

$
10,626

$
14,564Supplemental disclosures:Cash paid during the period for interest, net of interest capitalized

$
1,669

$
4,419Cash paid during the period for income taxes

$
4,032

$
2,488


The
accompanying notes are an integral part of these financial statements.

4

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TOREADOR RESOURCES CORPORATION        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (UNAUDITED)

NOTE 1BASIS OF PRESENTATION

The consolidated financial statements of Toreador Resources Corporation and subsidiaries ("Toreador," "we," "us," "our," or the "Company") included herein have been prepared by the
Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). They reflect all adjustments which are, in the opinion of management, necessary for
a fair presentation of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited financial statements. All such adjustments are of a
normal recurring nature, unless noted herein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures contained herein are adequate to make the
information presented not misleading. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 2008, which was initially filed with the SEC on March 16, 2009 and was amended on April 16, 2009. Certain
prior-year amounts have been reclassified and adjusted to conform to the 2009 presentation and to present the operations of Turkey, Hungary and Romania as discontinued operations. The
results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

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

On
March 3, 2009, we completed the sale of a 26.75% interest in the South Akcakoca Sub-Basin (SASB) project associated licenses located in the Black Sea offshore
Turkey to Petrol Ofisi for $55 million. In accordance with the revised agreement announced on February 3, 2009, $50 million of the proceeds was paid by Petrol Ofisi on
March 3, 2009, and the remaining $5 million was paid by Petrol Ofisi on September 1, 2009.

In
accordance with the covenants of our revolving credit facility with the International Finance Corporation, a portion of the proceeds of the sale of our 26.75% interest in the SASB to
Petrol Ofisi was used to fully repay the $36.4 million balance outstanding under the credit facility, which was comprised of $30 million principal, $5.9 million of additional
compensation due under the credit facility as a result of our repayment (such additional compensation calculated under the terms of the credit facility as a percentage of the Company's earnings before
interest, tax, depreciation, amortization and exploration expense) and $500,000 for accrued interest and fees.

On
September 30, 2009, the Company entered into a Quota Purchase Agreement (the "Quota Purchase Agreement") with RAG (Rohöl-Aufsuchungs Aktiengesellschaft), a
corporation organized under the laws of Austria ("RAG"), pursuant to which the Company agreed to sell 100% of its equity interests in Toreador Hungary Limited ("Toreador Hungary") to RAG for total
consideration consisting of (1) a cash payment of US$5.4 million (€3.7 million) paid at closing, (2) US$435,000 (€300,000), which was held
back and is subject to a post-closing adjustment, and (3) a contingent payment of US$2.9 million (€2 million) to be paid upon
post-transaction completion of agreements relating to certain assets of Toreador Hungary. The sale of Toreador Hungary was completed on September 30, 2009.

On
September 30, 2009, the Company entered into a Share Purchase Agreement (the "Share Purchase Agreement") with Tiway Oil BV, a company organized under the laws of the
Netherlands

5

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 1BASIS OF PRESENTATION (Continued)

("Tiway"),
and Tiway Oil AS, a company organized under the laws of Norway, pursuant to which the Company agreed to sell 100% of the outstanding shares of Toreador Turkey Ltd. ("Toreador
Turkey") to Tiway for total consideration consisting of: (1) a cash payment of $10.6 million to be paid at closing (subject to a post-closing adjustment),
(2) exploration success payments dependent upon certain future commercial discoveries as provided in the Share Purchase Agreement, up to a maximum aggregate consideration of $40 million,
and (3) future quarterly 10% pre-tax net profit interest payments if a field goes into production that was discovered by an exploration well drilled within four years of closing on
certain of the licenses then still held by Tiway. The sale of Toreador Turkey closed on October 7, 2009.



In December 2007, the Financial Accounting Standards Board (the "FASB") issued FASB Accounting Standards Codification (ASC) 805, "Business Combinations",formerly Statement No. 141R,"Business Combinations"("SFAS
No. 141R"). Under ASC 805, a company is required to recognize the assets acquired, liabilities assumed, contractual contingencies, and any contingent consideration measured at their fair value
at the acquisition date. It further requires that research and development assets acquired in a business combination that have no alternative future use are to be measured at their
acquisition-date fair value and then immediately charged to expense, and that acquisition-related costs are to be recognized separately from the acquisition and expensed as incurred. Among
other changes, this statement also requires that "negative goodwill" be recognized in earnings as a gain attributable to the acquisition, and any deferred tax benefits resultant in a business
combination be recognized in income from continuing operations in the period of the combination. ASC 805 is effective for business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning after December 15, 2008. On January 1, 2009, the Company adopted ASC 805 and applies its provisions prospectively to
business combinations that occur after adoption. The adoption did not have any immediate effect on the financial statements and related disclosures.

In
December 2007, the FASB issued FASB Accounting Standards Codification (ASC) 810,"Consolidations",formerly Statement No. 160, "Non-controlling Interests in Consolidated
Financial Statements"an amendment of ARB No. 51 ("SFAS No. 160"). The
Standard establishs accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
non-controlling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. Among other requirements, this statement requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the
non-controlling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the
non-controlling interest. The Standard is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2008. On January 1, 2009, the Company adopted ASC 810 and there was no effect on the financial statements and related disclosures.

In
February 2008, the FASB issued FASB Accounting Standards Codification (ASC) 820,"Fair Value Measurements and Disclosures", formerly
FSP No. 157-2 ("FASB No. 157-2") to defer the effective date to fiscal years beginning after November 15, 2008, and the interim periods within such fiscal
years, for all related nonfinancial assets and liabilities, including nonfinancial assets and liabilities

6

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 1BASIS OF PRESENTATION (Continued)

measured
at fair value in a business combination; impaired property, plant and equipment; goodwill; and initial recognition of asset retirement obligations. We adopted the Standard effective
January 1,
2009 and the adoption did not have a significant effect on the financial positions and results of operations. Refer to Note 14 for related disclosures.

In
March 2008, the FASB issued FASB Accounting Standards Codification (ASC) 815,"Derivitives and Hedging", formerly Statement
No. 161,"Disclosures about Derivative Instruments and Hedging Activities"an Amendment of FASB Statement No. 133 ("SFAS
No. 161"). This statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (i) how and
why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for and (iii) how derivative instruments and related hedged items affect
an entity's financial position, financial performance, and cash flows. The Standard is effective for annual periods beginning after November 15, 2008. On January 1, 2009, the Company
adopted the Standard and there was no effect on the financial statements and related disclosures.

In
May 2008, the FASB issued FASB Accounting Standards Codification (ASC) 470,"Debt", formerly FASB Staff Position ("FSP") No.
APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash
Settlement)" ("FSP APB No. 14-1"). The Standard specifies that issuers of such instruments should separately account for the liability and equity components
in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest costs is recognized in subsequent periods. The Standard is effective for financial statements issued for
fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and should be applied retrospectively for all periods presented. On January 1, 2009, the
Company adopted the Standard and there was no effect on our financial statements and related disclosures.

In
November 2008, the FASB issued FASB Accounting Standards Codification (ASC) 323,"InvestmentsEquity Method and Joint
Ventures", formerly ratified EITF 08-6, "Equity Method Investment Accounting Considerations"
("EITF 08-6") which clarifies how to account for certain transactions involving equity method investments. The initial measurement, decreases in value and changes in the level of
ownership of the equity method investment are addressed. The Standard is effective on a prospective basis for our fiscal year beginning January 1, 2009 and interim periods within the years.
Early application by an entity that has previously adopted an alternative accounting policy is not permitted. On January 1, 2009, the Company adopted the Standard and there was no effect on our
financial statements and related disclosures.

On
December 31, 2008 the SEC issued the final rule, "Modernization of Oil and Gas Reporting" (the "Final Reporting Rule"). The
Final Reporting Rule adopts revisions to the SEC's oil and gas reporting disclosure requirements and is effective for annual reports on Forms 10-K for years ending on or after
December 31, 2009. The revisions are intended to provide investors with a more meaningful and comprehensive understanding of oil and gas reserves to help investors evaluate their investments in
oil and gas companies. The amendments are also designed to modernize the oil and gas disclosure

7

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 1BASIS OF PRESENTATION (Continued)

requirements
to align them with current practices and changes in technology. Revised requirements in the Final Reporting Rule include, but are not limited to:



We
will comply with the disclosure requirements in our annual report on Form 10-K for the year ended December 31, 2009.

On
April 9, 2009, the FASB issued FASB Accounting Standards Codification (ASC) 825,"Financial Instruments", formerly FASB Staff
Position No. FAS 107-1 and APB 28-1,"Interim Disclosures about Fair Value of Financial Instruments"(FSP
107-1). The Standard requires disclosures about financial instruments, including fair value, carrying amount, and method and significant assumptions used to estimate the fair value. The
Company adopted this standard as of June 30, 2009. Our adoption of this standard did not affect our financial position or results of operations.

In
May 2009, the FASB issued FASB Accounting Standards Codification (ASC) 855,"Subsequent Events",formerly issued as Statement
No. 165, "Subsequent Events"(SFAS No. 165), to incorporate the accounting and disclosure
requirements for subsequent events into U.S. generally accepted accounting principles. The Standard introduces new terminology, defines a date through which management must evaluate subsequent events,
and lists the circumstances under which an entity must recognize and disclose events or transactions occurring after the balance-sheet date. The Company adopted the Standard as of June 30,
2009, which was the required effective date.

In
June 2009, the FASB issued SFAS No. 166, "Accounting for Transfers of Financial Assetsan amendment of FASB Statement
No. 140"(SFAS 166). SFAS 166 removes the concept of a qualifying special-purpose entity from SFAS 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," establishes a new "participating interest" definition that must be met for transfers of portions of financial assets to be eligible for sale
accounting, clarifies and amends the

8

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 1BASIS OF PRESENTATION (Continued)

de-recognition
criteria for a transfer to be accounted for as a sale, and changes the amount that can be recognized as a gain or loss on a transfer accounted for as a sale when beneficial
interests are received by the transferor. Enhanced disclosures are also required to provide information about transfers of financial assets and a transferor's continuing involvement with transferred
financial assets. This statement must be applied as of the beginning of an entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first
annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. We are currently evaluating the impact of this standard on our consolidated
financial statements.

In
June 2009, the FASB issued FASB Accounting Standards Codification (ASC) 810,"Consolidations", formerly issued as SFAS No. 167,
"Amendments to FASB Interpretation No. 46(R)" (SFAS 167). SFAS 167 amends FASB Interpretation No. 46 (revised December
2003), "Consolidation of Variable Interest Entities" (FIN 46(R)) to require an enterprise to qualitatively assess the determination of the primary beneficiary of a variable interest entity
(VIE) based on whether the entity (1) has the power to direct the activities of a VIE that most significantly impact the entity's economic performance and (2) has the obligation to
absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. Also, SFAS 167 requires an ongoing reconsideration of the primary
beneficiary, and amends the events that trigger a reassessment of whether an entity is a VIE. Enhanced disclosures are also required to provide information about an enterprise's involvement in a VIE.
This statement shall be effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual
reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. We are currently evaluating the impact of this standard on our consolidated financial
statements.

In
June 2009, the FASB issued Accounting Standards Update 2009-01,Amendments based on SFAS No. 168TheFASB Accounting Standards Codificationand the Hierarchy of Generally Accepted Accounting Principlesto codify in ASC 105, Generally Accepted Accounting
Principles, FASB Statement 168,TheFASB Accounting Standards
Codificationand the Hierarchy of Generally Accepted Accounting Principles, which was issued to establish the Codification as the sole
source of authoritative U.S. GAAP recognized by the FASB, excluding SEC guidance, to be applied by nongovernmental entities. The guidance in ASC 105 is effective for financial statements issued
for interim and annual periods ending after September 15, 2009.
Applying the guidance in ASC 105 did not impact the Company's financial condition and results of operations. The Company has revised its references to pre-Codification GAAP in its
financial statements for the three and nine month periods ended September 30, 2009.

In
August 2009, the FASB issued ASU 2009-05, "Fair Value Measurements and Disclosures (Topic 820)Measuring Liabilities at Fair Value" to provide guidance
when estimating the fair value of a liability. When a quoted price in an active market for the identical liability is not available, fair value should be measured using:



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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 1BASIS OF PRESENTATION (Continued)



If
a restriction exists that prevents the transfer of the liability, a separate adjustment related to the restriction is not required when estimating fair value. The Standard is effective for the
first reporting period (including interim periods) beginning after issuance. We are currently evaluating this new statement, but do not expect it to have an impact on our financial statements or
results of operations.

NOTE 2CONCENTRATION OF CREDIT RISK AND ACCOUNTS RECEIVABLE

Financial instruments that potentially subject us to a concentration of credit risk consist principally of cash, restricted cash and accounts receivable. We place our cash with high
credit quality financial institutions. We sell oil and natural gas to various customers.

We
periodically review the collectability of accounts receivable and record a valuation allowance for those accounts which are, in our judgment, unlikely to be collected. We have not had
any significant credit losses in the past and we believe our accounts receivable are fully collectable.

Accounts
receivable consisted of the following:

September 30,
2009

December 31,
2008Accrued oil receivables

$
2,455

$
751Trade receivables





Recoverable VAT


200


Other accounts receivable


79


306$
2,734

$
1,057


10

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 3EARNINGS (LOSS) PER COMMON SHARE

The following table reconciles the numerators and denominators of the basic and diluted earnings (loss) per common share computation:

Three Months Ended
September 30,2009

2008Basic earnings (loss) per share:Numerator:Income (loss) from continuing operations, net of income tax

$
(1,941
)
$
3,797Loss from discontinued operations, net of income tax


(10,518
)

(3,727
)Income (loss) available to common shareholders

$
(12,459
)
$
70Denominator:Weighted average common shares outstanding


20,869


19,929Basic earnings (loss) available to common shareholders per share from:Continuing operations

$
(0.09
)
$
(0.19
)Discontinued operations


(0.50
)

0.19$
(0.59
)
$
Diluted earnings (loss) per share:Numerator:Income (loss) from continuing operations, net of income tax

$
(1,941
)
$
3,797Loss from discontinued operations, net of income tax


(10,518
)

(3,727
)Income (loss) available to common shareholders

$
(12,459
)
$
70Denominator:Weighted average common shares outstanding


20,869


19,929Common stock options and warrants



(1)

1Conversion of 5.0% notes payable



(2)


(2)Diluted shares outstanding


20,869


19,930Diluted earnings (loss) available to common shareholders per share from:Continuing operations

$
(0.09
)
$
(0.19
)Discontinued operations


(0.50
)

0.19$
(0.59
)
$



(1)Conversion
of these securities would be antidilutive; therefore, there are no dilutive shares.(2)Conversion
of the 5% Convertible Senior Notes would be anti-dilutive therefore, there are no dilutive shares.


11

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Table of Contents

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 3EARNINGS (LOSS) PER COMMON SHARE (Continued)




Nine Months Ended
September 30,2009

2008Basic loss per share:Numerator:Loss from continuing operations, net of income tax

$
(8,464
)
$
(3,896
)Loss from discontinued operations, net of income tax


(11,988
)

(66,228
)Loss available to common shareholders

$
(20,452
)
$
(70,124
)Denominator:Weighted average common shares outstanding


20,428


19,776Basic loss available to common shareholders per share from:Continuing operations

$
(0.41
)
$
(0.20
)Discontinued operations


(0.59
)

(3.35
)$
(1.00
)
$
(3.55
)Diluted loss per share:Numerator:Loss from continuing operations, net of income tax

$
(8,464
)
$
(3,896
)Loss from discontinued operations, net of income tax


(11,988
)

(66,228
)Loss available to common shareholders

$
(20,452
)
$
(70,124
)Denominator:Weighted average common shares outstanding


20,428


19,776Conversion of 5.0% notes payable



(1)


(1)Diluted shares outstanding


20,428


19,776Diluted loss available to common shareholders per share from:Continuing operations

$
(0.41
)
$
(0.20
)Discontinued operations


(0.59
)

(3.35
)$
(1.00
)
$
(3.55
)


(1)Conversion
of the 5% Convertible Senior Notes would be antidilutive therefore, there are no dilutive shares.


12

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Table of Contents

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 4COMPREHENSIVE LOSS

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

Three Months Ended
September 30,

Nine Months Ended
September 30,2009

2008

2009

2008Net Income (loss)

$
(12,459
)
$
70

$
(20,452
)
$
(70,124
)Foreign currency translation adjustment


(2,034
)

(7,102
)

(4,289
)

(2,259
)Comprehensive loss

$
(14,493
)
$
(7,032
)
$
(24,741
)
$
(72,383
)


NOTE 5LONG-TERM DEBT

Long-term debt consisted of the following:

September 30,
2009

December 31,
2008Secured revolving facility with the International Finance Corporation

$


$
30,000Convertible senior notes


63,592


80,27563,592


110,275Less: current portion





30,000$
63,592

$
80,275


CONVERTIBLE SENIOR NOTES DUE OCTOBER 1, 2025

On September 27, 2005, we issued $75 million of Convertible Senior Notes due October 1, 2025 ("Convertible Senior
Notes") to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the "Securities Act"). The Company also granted the initial purchasers the option to
purchase an additional $11.25 million aggregate principal amount of Convertible Senior Notes to cover over-allotments. The over-allotment option was exercised on
September 30, 2005. The total principal amount of Convertible Senior Notes issued was $86.25 million and total net proceeds were approximately $82.2 million. We incurred
approximately $4.1 million of costs associated with the issuance of the Convertible Senior Notes; these costs have been recorded in other assets on the balance sheet and are being amortized to
interest expense using the straight-line interest rate method over the term of the Convertible Senior Notes.

The
net proceeds were used for general corporate purposes, including funding a portion of the Company's 2005 and 2006 exploration and development activities.

The
Convertible Senior Notes bear interest at a rate of 5% per annum and can be converted into common stock at an initial conversion rate of 23.3596 shares of common stock per $1,000
principal amount of Convertible Senior Notes, subject to adjustment (equivalent to a conversion price of approximately $42.81 per share). We may redeem the Convertible Senior Notes, in whole or in
part, on or after October 6, 2008, and prior to October 1, 2010, for cash at a redemption price equal to 100% of the principal amount of Convertible Senior Notes to be redeemed, plus any
accrued and unpaid interest, if the closing price of our common stock exceeds 130% of the conversion price over a

13

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Table of Contents

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 5LONG-TERM DEBT (Continued)

specified
period. On or after October 1, 2010, we may redeem the Convertible Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of Convertible Senior
Notes to be redeemed, plus any accrued and unpaid interest, irrespective of the price of its common stock. Holders may convert their Convertible Senior Notes at any time prior to the close of business
on the business day immediately preceding their stated maturity, and holders may, upon the occurrence of certain fundamental changes, and on October 1, 2010, October 1, 2015, and
October 1, 2020, require us to repurchase all or a portion of their Convertible Senior Notes for cash in an amount equal to 100% of the principal amount of such Convertible Senior Notes, plus
any accrued and unpaid interest.

An
inability to refinance or otherwise fund the Company's payment obligations with respect to the Convertible Senior Notes would result in an event of default under the Convertible
Senior Notes, which, if not cured or waived, would permit the holders of the Convertible Senior Notes to declare the outstanding principal, and any accrued and unpaid interest, if any, and any
premium, on all the Convertible Senior Notes to be immediately due and payable. If such an acceleration occurs, and the Company is not at that time able to repay, as a result of the actions above or
otherwise, or borrow sufficient funds to refinance, the Convertible Senior Notes, the Company may not be able to continue its operations and there would be doubt as to whether the Company could
continue as a going concern.

In
2008, we repurchased $6 million in principal amount of the Convertible Senior Notes on the open market and through privately negotiated transactions for $5.3 million
plus accrued interest of $109,347. Additionally, we expensed $241,965 of prepaid loan fees attributable to the repurchased Convertible Senior Notes. This resulted in a $458,535 gain on the early
extinguishment of debt.

In
April 2009, we repurchased $16.7 million principal amount of the Convertible Senior Notes on the open market and through privately negotiated transactions for
$12.7 million plus accrued interest and prepaid loan fees of $650,000. This repurchase resulted in a gain of $3.4 million on the early extinguishment of debt which was recorded in the
second quarter of 2009. In October 2009, we repurchased $9 million principal amount of the Convertible Senior Notes on the open market and through privately negotiated transactions for
$8.7 million plus accrued interest and prepaid loan fees of $340,000. This repurchase resulted in a loss of $26,000 on the early extinguishment of debt which will be recorded in the fourth
quarter of 2009.

We
intend to continue to buy back a portion of the currently outstanding Convertible Senior Notes in the open market or in privately negotiated transactions, subject to market
conditions, applicable legal requirements and other factors.

14

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Table of Contents

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 5LONG-TERM DEBT (Continued)

SECURED REVOLVING FACILITY WITH THE INTERNATIONAL FINANCE CORPORATION

On December 28, 2006, we entered into a loan and guarantee agreement with International Finance Corporation. The loan and
guarantee agreement provided for a $25 million facility which was a secured revolving facility with a maximum facility amount of $25 million which maximum facility amount would have
increased to $40 million if the projected total borrowing base amount exceeds $50 million. The $25 million facility funded on March 2, 2007. The loan and guarantee
agreement also provided for an unsecured $10 million facility which funded on December 28, 2006. Both the $25 million facility and the $10 million facility were to fund our
operations in Turkey and Romania.

On
March 3, 2009, we repaid and retired the facilities with the International Finance Corporation. The total amount of the payment was $36.4 million, which was comprised of
$30 million principal, $5.9 million additional compensation due under the credit facility as a result of our repayment (such additional compensation calculated under the terms of the
credit facility as a percentage of the Company's earnings before interest, tax, depreciation, amortization and exploration expense) and $500,000 for accrued interest and fees. As a result of the early
extinguishment, we recorded a loss of $4.9 million for the period ended September 30, 2009 which was recorded in discontinued operations.

NOTE 6ASSET RETIREMENT OBLIGATIONS

We account for our asset retirement obligations in accordance with the provisions of FASB Accounting Standards Codification (ASC) 410,"Asset Retirement and
Enviromental Obligations", which requires us 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 the 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, we either settle the obligation for its recorded amount or incur
a gain or loss upon settlement.

The
following table summarizes the changes in our asset retirement liability (excluding the asset retirement obligations held for sale) during the nine months ended September 30,
2009 and the year ended December 31, 2008:

Nine Months
Ended Sept. 30,
2009

Year Ended
December 31,
2008Asset retirement obligation at beginning of period

$
6,037

$
5,106Asset retirement accretion expense


381


357Foreign currency exchange gain


340


(279
)Change in estimates





1,213Property dispositions





(360
)Asset retirement obligation at end of period

$
6,758

$
6,037


15

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Table of Contents

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 7GEOGRAPHIC OPERATING SEGMENT INFORMATION

We have operations in only one industry segment, the oil and natural gas exploration and production industry. We are structured along geographic operating segments or regions. During the
current period we reclassified our operations in Turkey, Hungary and Romania to discontinued operations (See Note 12). As a result, we have continuing operations in the United States and
France.

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".

Three Months Ended September 30, 2009United States

France

TotalRevenues

$
63

$
5,141

$
5,204Costs and expenses


3,307


3,705


7,012Operating income (loss)

$
(3,244
)
$
1,436

$
(1,808
)




Three Months Ended September 30, 2008United States

France

TotalRevenues

$
15

$
9,626

$
9,641Costs and expenses


(131
)

3,626


3,495Operating income

$
146

$
6,000

$
6,146




Nine Months Ended September 30, 2009United States

France

TotalRevenues

$
217

$
12,879

$
13,096Costs and expenses


12,729


11,501


24,230Operating income (loss)

$
(12,512
)
$
1,378

$
(11,134
)




Nine Months Ended September 30, 2008United States

France

TotalRevenues

$
40

$
29,438

$
29,478Costs and expenses


14,548


11,377


25,925Operating income (loss)

$
(14,508
)
$
18,061

$
3,553


16

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Table of Contents

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 7GEOGRAPHIC OPERATING SEGMENT INFORMATION (Continued)



Total Assets(1)United States

France

Hungary

Turkey

Romania

TotalContinuing Operations

Discontinued OperationsSeptember 30, 2009

$
194,256

$
97,404

$


$
(109,049
)
$


$
182,611December 31, 2008

$
276,434

$
93,691

$
1,974

$
(69,537
)
$
(33,046
)
$
269,516


(1)Each
segment's total assets reflect the effect of intersegment eliminations of $53,266 for the periods ending September 30, 2009 and
$62,360 December 31, 2008


NOTE 8INCOME TAXES

At September 30, 2009, we recorded a zero income tax payable as all income taxes have been paid. For the nine months ended September 30, 2009 and 2008 we paid income taxes
of approximately $4 million and $2.5 million, respectively, related to French taxable income. As of September 30, 2009, our French operations recorded a $332,000 tax benefit, and
the U.S. operations recorded a tax benefit of $670,000, which resulted in a consolidated tax benefit of $1 million. Our effective income tax rate differs from the statutory rates applicable to
jurisdictions in which we operate due primarily to the establishment of a U.S. valuation allowance of $4 million, which was required because we could not be assured of the future utilization of
net operating losses of $11.8 million.

The
Company records income taxes in accordance with the provisions of FASB Accounting Standards Codification (ASC) 740,"Income Taxes". We
have recognized an increase in the liability for unrecognized tax expense of approximately $45,000, which was accounted for as a decrease to the January 1, 2007 balance of retained earnings. As
of the date of adoption and after the impact of recognizing the increase in liability noted above, our unrecognized tax benefits totaled approximately $357,000, the disallowance of which would not
materially affect the effective income tax rate. There are no tax positions for which a material change in the unrecognized tax benefit is reasonably possible in the next 12 months.

The
Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within its global operations in income tax expense. Additionally, the Company
recognized approximately $28,000 for the accrual of interest and penalties at January 1, 2007, which was included as a component of the $357,000 unrecognized tax benefit noted above. During the
nine months ended September 30, 2009, the Company recognized $0 in potential interest and penalties associated with uncertain tax
positions. At September 30, 2009, our income tax liability was reduced by $314,000 as a result of the close of the 2005 tax year. To the extent interest and penalties are not assessed with
respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.

In
addition to U.S. federal tax returns, we file several state and foreign tax returns, many of which remain open for examination for five years.

17

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Table of Contents

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 9CAPITAL

For the nine months ended September 30, 2009, the Company issued 1,314,204 shares of stock to employees and directors, of which 939,597 shares were immediately vested in
accordance with the terms of the grants and 31,000 stock options were exercised under the terms of the option agreements. Forfeitures for the nine months ended September 30, 2009 were 122,884
shares of restricted stock and 179,500 stock options.

NOTE 10CAPITALIZED INTEREST

We capitalize interest on major projects that require an extended period of time to complete. Interest capitalized for the three months ended September 30, 2009 and 2008 was
$118,000 and $230,000 respectively. Interest capitalized for the nine months ended September 30, 2009 and 2008 was $355,000 and $780,000, respectively.

NOTE 11COMMITMENTS AND CONTINGENCIES

In 2005, two separate incidents occurred offshore Turkey in the Black Sea, which resulted in the sinking of two caissons (the "Fallen Structures") and the loss of three natural gas
wells. The Company has not been requested to or ordered by any governmental or regulatory body to remove the caissons. Therefore, the Company believes that the likelihood of receiving such a request
or order is remote and no liability has been recorded. In connection with the Company's sale of its 26.75% interest in the SASB to Petrol Ofisi in March 2009 and its sale of Toreador Turkey to Tiway
in October 2009, the Company has agreed to indemnify Petrol Ofisi and Tiway, respectively, against and in respect of any claims, liabilities and losses arising from the Fallen Structures. The Company
has also indemnified a third party vendor for any claims made related to these incidents.

On
October 16, 2003, the Company entered into an agreement (the "Netherby Agreement") with Netherby Investments Limited ("Netherby") pursuant to which Netherby agreed to post the
collateral required by the Turkish government for the Company to retain its rights to the eight off-shore exploration SASB licenses in exchange for a 1.5% gross overriding royalty interest
(the "Overriding Royalty") on the net value to Toreador of all future production on SASB, if any. On April 30, 2009, the Company received a letter from attorneys representing Netherby claiming
that Toreador's sale of its 26.75% interest in the SASB to Petrol Ofisi in March 2009 and Toreador's proposed sale of its remaining 10% interest in the SASB constitute a breach of the Netherby
Agreement and demanding a $10.4 million payment. Toreador does not believe that Netherby is entitled to the $10.4 million claimed, though no formal legal evaluation of the likely outcome
of this claim can be made at this time. The Company has agreed to indemnify Petrol Ofisi and Tiway against and in respect of any and all claims, liabilities, and losses arising from the Overriding
Royalty. Additionally, the Company believes the claim is baseless, without merit and will be vigorously defended against.

On
June 17, 2009, The Scowcroft Group, Inc. ("Scowcroft") filed a complaint in the United States District Court for the District of Columbia against the Company. The
complaint alleges that Toreador breached a contract (the "Scowcroft Contract") between Scowcroft and Toreador relating to the sale of its interests in the SASB and that Scowcroft is entitled to a
success fee thereunder as a result of the sale of Toreador's interests in the SASB to Petrol Ofisi in March 2009. The complaint also alleges unjust enrichment/quantum meruit and fraud. Scowcroft is
seeking damages in the amount of $2 million plus interest, costs and expenses. On July 24, 2009, the Company filed a motion to dismiss

18

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Table of Contents

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 11COMMITMENTS AND CONTINGENCIES (Continued)

the
complaint. The district court denied the Company's motion to dismiss the action on October 26, 2009. The Company's answer is due by November 20, 2009. The Company believes the
lawsuit lacks merit and intends to continue vigorously defending itself.

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 suit or claim would not have a material adverse effect on our financial position.

NOTE 12DISCONTINUED OPERATIONS

In the fourth quarter of 2008 and during the first quarter of 2009, Toreador farmed out or sold all of its working interests in Romania to three different companies and closed its
office; thus, we no longer have any operational involvement in Romania. This resulted in a financial gain of $5.8 million which was recorded in the first quarter of 2009. All revenues and
expenses associated with the Romanian operation for the three months ended September 30, 2009 and 2008 and for the nine months ended September 30, 2009 and 2008 have been included in
discontinued operations.

In
February 2009, the Board of Directors authorized management to retain Stellar Energy Advisors, based in London, UK, to manage a process to monetize its wholly owned subsidiary,
Toreador Turkey, including the Company's remaining 10% interest in the SASB, in addition to the onshore production, and 2.2 million net acres in exploration licenses that are currently held in
Turkey. On September 30, 2009, the Company entered into the Share Purchase Agreement with Tiway, pursuant to which the Company agreed to sell 100% of the outstanding shares of Toreador Turkey
to Tiway. The sale of Toreador Turkey was completed on October 7, 2009. All revenues and expenses associated with the Turkish operation, including the dry hole cost of the Durusu #1 well
of $1.3 million and impairment expense of $5.3 million, for the three months ended September 30, 2009 and 2008 and for the nine months ended September 30, 2009 and 2008
have been included in discontinued operations.

Additionally,
on September 30, 2009, the Company entered into the Quota Purchase Agreement with RAG, pursuant to which the Company agreed to sell 100% of its equity interests in
Toreador Hungary to RAG. The sale of Toreador Hungary was completed on September 30, 2009. This resulted in a financial loss of $4.2 million which was recorded in the third quarter of
2009.Therefore, all expenses associated with the Hungarian operation for the three months ended September 30, 2009 and 2008 and for the nine months ended September 30, 2009 and 2008 have
been included in discontinued operations.

19

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Table of Contents

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 12DISCONTINUED OPERATIONS (Continued)

The results of operations of assets in Romania, Turkey and Hungary have been presented as discontinued operations in the accompanying consolidated statement of operations. Results for
these assets reported as discontinued operations were as follows:

Three Months
Ended
September 30,

Nine Months
Ended
September 30,2009

2008

2009

2008Revenue:Oil and natural gas sales

$
1,632

$
8,054

$
4,545

$
22,062Operating costs and expenses:Lease operating expense


381


2,477


886


6,277Exploration expense


136


756


868


1,979Dry hole costs


1,318





1,318


Depreciation, depletion and amortization


52


8,788


157


26,463Impairment of oil and natural gas properties


5,425





10,725


53,479General and administrative expense


1,720


580


3,424


2,045(Gain) loss on sale of properties and other assets


4,171





(1,675
)

Total operating costs and expenses


13,203


12,601


15,703


90,243Operating loss


(11,571
)

(4,547
)

(11,158
)

(68,181
)Other income (expense)Foreign currency exchange gain


1,190


1,608


3,822


1,953Interest and other income


18


261


414


395Loss on early extinguishment of debtrevolving credit facility








(4,881
)

Interest expense


(155
)

(1,030
)

(185
)

(3,266
)Net loss before income taxes


(10,518
)

(3,708
)

(11,988
)

(69,099
)Income tax provision (benefit)





19





(2,871
)Loss from discontinued operations

$
(10,518
)
$
(3,727
)
$
(11,988
)
$
(66,228
)


The
assets and liabilities of discontinued operations presented separately under the captions "Oil and natural gas properties, net, held for sale", "Other assets held for sale" and
"Liabilities held for sale" in balance sheets for the periods ended September 30, 2009 and December 31, 2008 are valued at

20

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Table of Contents

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 12DISCONTINUED OPERATIONS (Continued)

the
lower of cost or fair value less cost of selling such assets. The table below shows the components of the other assets held for sale and liabilities held for sale.

September 30,
2009

December 31,
2008(Unaudited)Current assets:Cash

$
2,203

$
7,519Accounts receivable


5,811


4,392Other


6,963


1,567Total current assets


14,997


13,478Other assets


394


1,485Other assets held for sale

$
15,371

$
14,963Current liabilities:Accounts payable and accrued liabilities

$
2,764

$
9,223Deferred lease payable





115Asset retirement obligations





2,028Liabilities held for sale

$
2,764

$
11,366


NOTE 13DERIVATIVES

We periodically utilize derivative instruments such as futures and swaps for purposes of hedging our exposure to fluctuations in the sales price of crude oil and natural gas. We entered
into futures and swap contracts for approximately 16,000 Bbls per month for the months of January 2008 through September 2008. This resulted in a net derivative fair value gain of $2.4 million
for the three months ended September 30, 2008 and a loss of $1.8 million for the nine months ended September 30, 2008. Presented in the table below is a summary of the contracts
entered in 2008 and (gain) loss as of September 30, 2008:

Type

Period

Barrels

Floor

Ceiling

(Gain) LossCollar

January 1 - March 31, 2008


48,000

$
84.75

$
92.75

$
19Collar

April 1 - June 30, 2008


48,000

$
92.25

$
100.25


2,239Collar

July 1 - September 30, 2008


48,000

$
91.75

$
99.75


(452
)$
1,806


On
June 16, 2009, we entered into futures and swap contracts for approximately 18,000 Bbls per month for the months of July 2009 through December 2009. Presented in the table
below is a summary

21

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Table of Contents

TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 13DERIVATIVES (Continued)

of
the contracts entered into for the nine month period ended September 30, 2009 and gain as of September 30, 2009:

Type

Period

Barrels

Floor

Ceiling

GainCollar

July 1 - September 30, 2009


55,200

$
65.00

$
77.00

$
(7
)Collar

October 1 - December 31, 2009


55,200

$
65.00

$
77.00


$
(7
)


NOTE 14FAIR VALUE MEASUREMENTS

The carrying amounts of financial instruments including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities
approximate fair value, at September 30, 2009 and December 31, 2008, due to the short-term nature or maturity of the instruments.

Long-term
debt approximated fair value based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same
maturities.

On
September 30, 2009, the convertible subordinate notes which had a book value of $63.6 million, were trading at $965.00, which would equal a fair market value of
approximately $61.4 million.

On
December 31, 2008 the convertible subordinate notes which had a book value of $80.28 million, were trading at $770.00, which would equal a fair market value of
approximately $61.8 million.

The
Company establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three levels, in accordance with the provisions of
FASB Accounting Standards Codification (ASC) 820,"Fair Value Measurements and Disclosures."The fair value hierarchy gives the highest priority to
quoted market prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 inputs are
inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly.

Certain
assets and liabilities are reported at fair value on a non-recurring basis in our consolidated balance sheets. The following methods and assumptions were used to estimate the
fair values:

Oil and Gas Properties Held for SaleIn February 2009, the Board of Directors authorized management to retain Stellar Energy Advisors, based in
London, UK, to manage a process to monetize its wholly owned subsidiary, Toreador Turkey Limited, including the Company's remaining 10% interest in the SASB, in addition to the onshore production, and
2.2 million net acres in exploration licenses that are currently held in Turkey. These properties are valued at the lower of cost or fair value less selling expenses.

Asset ImpairmentsIn accordance with the provisions of FASB Accounting Standards Codification (ASC) 360, ,"Property, Plant
and Equipment,"we review a proved oil and gas property for impairment when events and circumstances indicate a possible decline in the recoverability of the carrying value of

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 14FAIR VALUE MEASUREMENTS (Continued)

such
property. We estimate the undiscounted future cash flows expected in connection with the property and compare such undiscounted future cash flows to the carrying amount of the property to
determine if the carrying amount is recoverable. If the carrying amount of the property exceeds its estimated undiscounted future cash flows, the carrying amount of the property is reduced to its
estimated fair value. Fair value may be estimated using comparable market data, a discounted cash flow method, or a combination of the two. In the discounted cash flow method, estimated future cash
flows are based on management's expectations for the future and include estimates of future oil and gas production, commodity prices based on commodity futures price strips as of the date of the
estimate, operating and development costs, and a risk-adjusted discount rate.

GoodwillWe account for goodwill in accordance with the provisions of FASB Accounting Standards Codification (ASC) 350,
"Intangibles Goodwill and Other,". Goodwill and indefinite-lived intangible assets are not amortized but are reviewed annually (or more frequently if
impairment indicators arise) for impairment.

Asset Retirement ObligationsWe estimate the fair values of asset retirement obligations (AROs) on initial recognition based on discounted cash flow
projections using numerous estimates, assumptions and judgments regarding such factors as the existence of a legal obligation for an ARO; estimated probabilities, amounts and timing of settlements;
the credit-adjusted risk-free rate to be used; and inflation rates. See Note 6Asset Retirement Obligations for a summary of changes in AROs.

Measurement
information for assets that are measured at fair value on a non-recurring basis was as follows:

Fair Value Measurements UsingDescription

Fair Value
Measurement

Quoted
Prices
in
Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total
Impairment
Loss(in millions)Nine months Ended September 30, 2009Impaired oil and natural gas properties

$
16,507







$
16,507

$
(10,725
)


NOTE 15IMPAIRMENT OF ASSETS

We evaluate producing property costs for impairment and reduce such costs to fair value if the sum of expected undiscounted future cash flows is less than net book value pursuant to the
provisions of FASB Accounting Standards Codification (ASC) 360,"Property, Plant and Equipment". We assess impairment of non-producing
leasehold costs and undeveloped mineral and royalty interests periodically on a field-by-field basis. We charge any impairment in value to expense in the period incurred. For
the nine months ended September 30, 2009, we incurred an impairment charge of $10.7 million on our natural gas properties in Turkey and Hungary which is included in discontinued
operations.

The
impairment charge in Turkey of $5.3 million is a result of a decline in the fair market value of the Company's interest in South Akcakoca Sub-Basin assets, which
was recorded in the first quarter of

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 15IMPAIRMENT OF ASSETS (Continued)

2009.
The fair market value decline was due to a 25% reduction in the posted sales price of natural gas produced in Turkey announced on May 1, 2009.

In
the third quarter of 2009, the Company decided not to proceed with the construction of the Kiha pipeline in Hungary, due to the poor results of the Tompa Deep well and the impending
sale of Toreador Hungary, which was completed on September 30, 2009. This resulted in an impairment of $5.4 million which represented our share of costs capitalized for the pipeline and
the previously drilled Kiha 15 well.

NOTE 16RELOCATION OF HEADQUARTERS AND EMPLOYEE TERMINATIONS

As of June 30, 2009 the Company has completed the relocation of its headquarters from Dallas, Texas to Paris, France.

On
March 17, 2009, Toreador provided notice to 16 employees whose employment was terminated on such date or whose employment will be terminated in connection with the expected
relocation of our headquarters to Paris. As of June 30, 2009 the relocation and closing of the Dallas operations was complete, with certain employees entitled to receive financial incentives
because the relocation was completed by June 30, 2009. With regard to severance payments made, upon the receipt from each severed employee of an executed release of all present and future
claims, Toreador has paid an aggregate of $158,000 in cash and issued an aggregate of 367,000 shares of Toreador common stock. In addition, upon certain milestones associated with the relocation
having been met, an additional aggregate of $120,752 in stock was distributed to certain employees. In accordance with the provisions of FASB Accounting Standards Codification (ASC) 420, "Exit or Disposal Cost Obligations",the costs associated with the involuntary termination benefits were recognized during the three month period ended
March 31, 2009 with respect to those employees terminated prior to March 31, 2009 and costs associated with certain employees required to remain with the Company longer than
60 days are recognized over the minimum service period.

As
of September 30, 2009 we had $4.2 million of costs associated with the Dallas office/relocation of our headquarters to Paris, France. In connection with the relocation
of our corporate headquarters to France, additional material charges may be incurred, the amount of which Toreador cannot reasonably estimate at this time, but which will likely include continuing
rental obligations for the Dallas office, subject to any reductions due to any subleases, and other relocation costs.

NOTE 17SALE OF TOREADOR HUNGARY

On September 30, 2009, the Company entered into the Quota Purchase Agreement with RAG, pursuant to which the Company agreed to sell 100% of its equity interests in Toreador
Hungary to RAG for total consideration consisting of (1) a cash payment of €3.7 million (US$5.4 million) paid at closing, (2) US$435,000
(€300,000), which was held back and is subject to a post-closing adjustment, and (3) a contingent payment of US$2.9 million
(€2 million) to be paid upon post-transaction completion of agreements relating to certain assets of Toreador Hungary. The sale of Toreador Hungary was completed on
September 30, 2009 and resulted in a financial loss of $4.2 million or $0.20 loss per share for the nine months ended September 30, 2009.

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TOREADOR RESOURCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 17SALE OF TOREADOR HUNGARY (Continued)

The
contingent consideration of $435,000 which was held back and is subject to a post-closing adjustment and the $2.9 million which may be paid upon
post-transaction completion of agreements relating to certain assets of Toreador Hungary will be recorded as gain on the sale if and when the funds are received.

NOTE 18SUBSEQUENT EVENTS

The Company evaluated its September 30, 2009 financial statements for subsequent events through the date the financial statements were issued which was November 9, 2009.
The following items require recognition or disclosure in the financial statements.

On
September 30, 2009, the Company entered into the "Share Purchase Agreement with Tiway, pursuant to which the Company agreed to sell 100% of the outstanding shares of Toreador
Turkey to Tiway for total consideration consisting of: (1) a cash payment of $10.6 million to be paid at closing (subject to a post-closing adjustment),
(2) exploration success payments dependent upon certain future commercial discoveries as provided in the Share Purchase Agreement, up to a maximum aggregate consideration of $40 million,
and (3) future quarterly 10% pre-tax net profit interest payments if a field goes into production that was discovered by an exploration well drilled within four years of closing on
certain of the licenses then still held by Tiway. The sale of Toreador Turkey was completed on October 7, 2009.

In
October 2009, we repurchased $9 million principal amount of the Notes on the open market and through privately negotiated transactions for $8.7 million plus accrued
interest and prepaid loan fees of $340,000. This repurchase resulted in a loss of $26,000 on the early extinguishment of debt which will be recorded in the fourth quarter of 2009.

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

The following discussion is intended to assist you in understanding our business and results of operations together with our present
financial condition. This section should be read in conjunction with our Consolidated Financial Statements and the accompanying notes included elsewhere in this Quarterly Report on
Form 10-Q, as well as our Annual Report on Form 10-K for the year ended December 31, 2008, which was initially filed with the SEC on March 16, 2009
and amended on April 16, 2009. Certain prior-year amounts have been reclassified and adjusted to conform to the 2009 presentation and to present the operations of Turkey, Hungary
and Romania as discontinued 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 within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") 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," "will," "would," "could," "should," and similar expressions are intended
to be among the statements that identify forward-looking statements. The factors that may affect our expectations regarding our operations include, among others, the
following:



In
addition to these factors, important factors that could cause actual results to differ materially from our expectations ("Cautionary Statements") are disclosed under "Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2008, initially filed with the SEC on March 16, 2009 and amended on April 16, 2009, which are
incorporated by reference herein.

All
written and oral forward-looking statements attributable to us are expressly qualified in their entirety by the Cautionary Statements. We undertake no obligation to update or revise
publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

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EXECUTIVE OVERVIEW

We are an independent international energy company engaged in the acquisition, exploration, development and production of crude oil. We
hold interests in developed and undeveloped oil properties in France and are currently focused on developing the conventional exploration of our French acreage and unconventional exploitation of the
Paris Basin Oil Shale. Our financial results depend upon many factors that significantly affect our results of operations including the following:



During
2008, we saw oil prices rise to unprecedented levels. Then in September 2008 we saw the start of a deterioration in the credit and equity markets, which continued further in the
beginning of 2009 before recovering somewhat later in the year. In early to mid-2009 we also experienced a 50% - 60% decline in oil prices from the highest point received in
2008. Although oil prices have begun to rebound, oil prices are, and we expect, will continue to be, extremely volatile for the remainder of the fiscal year 2009. The results of our operations are
highly dependent upon the prices received from our oil production, which are dependent on numerous factors beyond our control. Accordingly, significant changes to oil prices are likely to have a
material impact on our financial condition, results of operation, cash flows and revenue. As discussed further below, these severe
economic conditions have caused the Company to reevaluate its capital expenditure program for 2009 and how the Company will operate on a go forward basis.

In
February 2009, we developed a corporate platform that was the building block of our new corporate strategy that was presented at the Annual Shareholder Meeting in June 2009. The Board
of Directors and management are committed to restoring shareholder value, exercising financial discipline, transparency in all transactions, assessing strategic alternatives that lay outside and
beyond the platform and strengthening the Company during the current economic crisis.

We
believe that the following proactive steps will be the base for the future growth of the Company:



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For the nine months ended September 30, 2009:



At
September 30, 2009:



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LIQUIDITY AND CAPITAL RESOURCES

This section should be read in conjunction with Note 5 to Notes to Consolidated Financial Statements included in this filing.



The Company's liquidity depends on cash flow from operations and existing cash resources. As of September 30, 2009, we had cash
of $10.6 million, a current ratio of approximately 4.07 to 1 and a debt to equity ratio of 2.02 to 1. For the nine months ended September 30, 2009, we had an operating loss of
$11.1 million and capital expenditures were $5 million.

During
2008, we saw oil prices rise to unprecedented levels. Then in September 2008 we saw the start of a deterioration in the credit and equity markets, which continued further in the
beginning of 2009 before recovering somewhat later in the year. In early to mid-2009 we also experienced a 50% - 60% decline in oil prices from the highest point received in
2008. Although oil prices have begun to rebound, oil prices are, and we expect, will continue to be, extremely volatile for the remainder of the fiscal year 2009. In order to reduce our vulnerability
to crude oil price fluctuations, we have entered into a collar for approximately 18,000 Bbls per month for the months of July 2009 through December 2009. This transaction sets the floor at $65.00 per
Bbl and the ceiling at $77.00 per Bbl.

As
discussed further below, for the year ended December 31, 2008, we had a downward reserves revision of 37.41%. At December 31, 2007 the price used for evaluating our oil
reserves was $95.72 per barrel as compared to the December 31, 2008 price of $34.29 per barrel. This 64% decrease in oil price had a severe impact on the economic life of our wells, but also on
the discounted present value at 10% and the standardized measure or proved reserves. As discussed further below, these severe economic conditions have caused the Company to reevaluate its capital
expenditure program for 2009 and how the Company will operate on a go forward basis.

In
June 2009, the Company announced its strategy for the next three years at the Annual Shareholder Meeting. The strategy is built on: (i) reduction in
overheadthrough relocating our corporate headquarters to Paris, France, significant savings of general and administrative expense due to a consolidation of job functions and the sale of
all the Company's remaining interest in Turkey; (ii) uses of cashother than funding our capital program to meet minimum commitments associated with the Company's licenses, we
expect that our primary use of discretionary cash will be used to reduce debt; (iii) a focused oil portfolio reviewthe Company will refocus its efforts to those areas that offer
the best chance of success and have a proven infrastructure for the oil industry. We believe that our current acreage position in France can serve as the platform for growth and offer the Company the
best opportunity to create stockholder value; and (iv) performance managementthe

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Board
of Directors and management are committed to the best practices in corporate governance and will continually be reviewing and where necessary revising the procedures used to operate the Company.
We intend to use third party expertise to review and challenge our procedures and methodologies, both operationally and administratively. Also performance management, actions followed by positive
results, will become a driving principle in operating the Company.

On
March 3, 2009, we completed the sale of a 26.75% interest in the SASB to Petrol Ofisi for $55 million. In accordance with the agreement, $50 million of the
proceeds was paid by Petrol Ofisi upon closing and the remaining $5 million was paid on September 1, 2009. Simultaneous with the closing of the sale of the 26.75% interest in the SASB to
Petrol Ofisi, we repaid the secured revolving credit facility with the International Finance Corporation. The total amount of the payment was $36.4 million, which was comprised of
$30 million principal, $5.9 million additional compensation due under the credit facility as a result of our repayment (such additional compensation calculated under the terms of the
credit facility as a percentage of the Company's earnings before interest, tax, depreciation, amortization, and exploration expense) and $500,000 for accrued interest and fees. As a result of the
early extinguishment, we recorded a loss of $4.9 million for the nine months ended September 30, 2009, which was recorded in discontinued operations. Following the retirement of the
credit facility with the International Finance Corporation, the Company does not have a credit facility and currently relies on its cash balance to meet its immediate cash requirements. Management
will seek to secure a new facility in 2009, but given the current economic and financial market conditions due to the global credit market crisis, there can be no assurance that a new facility can be
obtained on acceptable terms or at all.

On
September 30, 2009, we completed the sale of Toreador Hungary for total consideration consisting of (1) a cash payment of US$5.4 million
(€3.7 million) paid at closing, (2) US$435,000 (€300,000), which was held back and is subject to a post-closing adjustment, and (3) a
contingent payment of US$2.9 million (€2 million) to be paid upon post-transaction completion of agreements relating to certain assets of Toreador Hungary.

On
October 7, 2009, we completed the sale of Toreador Turkey for total consideration consisting of: (1) a cash payment of $10.6 million to be paid at closing
(subject to a post-closing
adjustment), (2) exploration success payments dependent upon certain future commercial discoveries as provided in the Share Purchase Agreement, up to a maximum aggregate consideration of
$40 million, and (3) future quarterly 10% pre-tax net profit interest payments if a field goes into production that was discovered by an exploration well drilled within four
years of closing on certain of the licenses then still held by Tiway.

Our
capital expenditure budget for 2009 is currently estimated at $8.3 million, which includes $5 million of capital expenditures incurred through September 30, 2009
for our share of capital costs incurred in Turkey and Hungary prior to the sale of those entities and approximately $3.3 million for the drilling of the La Garenne exploratory well in France.

As
discussed in Note 11, on April 30, 2009, the Company received a letter from attorneys representing Netherby claiming that Toreador's sale of its 26.75% interest in the
SASB to Petrol Ofisi in March 2009 and Toreador's proposed sale of its remaining 10% interest in the SASB constitute a breach of the Netherby Agreement and demanding a $10.4 million payment.
Toreador does not believe that Netherby is entitled to the $10.4 million claimed, though no formal legal evaluation of the likely outcome of this claim can be made at this time. Additionally,
the Company believes the claim is baseless, without merit and will be vigorously defended against.

On
June 17, 2009, The Scowcroft Group, Inc. ("Scowcroft") filed a complaint in the United States District Court for the District of Columbia against the Company. The
complaint alleges that Toreador breached a contract (the "Scowcroft Contract") between Scowcroft and Toreador relating to the sale of its interests in the SASB and that Scowcroft is entitled to a
success fee thereunder as a result of the

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sale
of Toreador's interests in the SASB to Petrol Ofisi in March 2009. The complaint also alleges unjust enrichment/quantum meruit and fraud. Scowcroft is seeking damages in the amount of
$2 million plus interest, costs and expenses. On July 24, 2009, the Company filed a motion to dismiss the complaint. The district court denied the Company's motion to dismiss the action
on October 26, 2009. The Company's answer is due by November 20, 2009. The Company believes the lawsuit lacks merit and intends to continue vigorously defending itself.

We
believe we will have sufficient cash flow from operations to meet all of our 2009 obligations. However, if the cash flow from our operations is less than anticipated and if we have
used up our cash we may also seek additional capital by: (i) forward selling our crude oil production; (ii) selling our working interest in properties; or (iii) a combination of
these actions in addition to issuing new debt or equity securities. Management is also seeking to secure a new credit facility, though there is no guarantee that the Company will be able to obtain a
new credit facility on satisfactory terms, if at all. We believe such actions will allow us to meet our capital commitments and that as a result, we will have sufficient liquidity for the remainder of
2009.



On December 28, 2006, we entered into a loan and guarantee agreement with International Finance Corporation. The loan and
guarantee agreement provided for a $25 million facility which was a secured revolving facility with a maximum facility amount of $25 million which maximum facility amount would have
increased to $40 million when the projected total borrowing base amount exceeds $50 million. The $25 million facility funded on March 2, 2007. The loan and guarantee
agreement also provided for an unsecured $10 million facility which funded on December 28, 2006. Both the $25 million facility and the $10 million facility were used to
fund our operations in Turkey and Romania.

On
March 3, 2009, we repaid and retired the facilities with the International Finance Corporation. The total amount of the payment was $36.4 million, which was comprised of
$30 million principal, $5.9 million additional compensation due under the credit facility as a result of our repayment (such additional compensation calculated under the terms of the
credit facility as a percentage of the Company's earnings before interest, tax, depreciation, amortization and exploration expense) and $500,000 for accrued interest and fees.



On September 27, 2005, we sold $75 million of Convertible Senior Notes due October 1, 2025 to qualified
institutional buyers pursuant to Rule 144A of the Securities Act of 1933. We also granted the initial purchasers the option to purchase an additional $11.25 million aggregate principal
amount of Convertible Senior Notes to cover over-allotments. The option was exercised on September 30, 2005. The total principal amount of Convertible Senior Notes issued was
$86.25 million and total net proceeds were approximately $82.2 million.

The
Convertible Senior Notes bear interest at a rate of 5% per annum and can be converted into common stock at an initial conversion rate of 23.3596 shares of common stock per $1,000
principal amount of Convertible Senior Notes, subject to adjustment (equivalent to a conversion price of approximately $42.81 per share). We may redeem the Convertible Senior Notes, in whole or in
part, on or after October 6, 2008, and prior to October 1, 2010, for cash at a redemption price equal to 100% of the principal amount of Convertible Senior Notes to be redeemed, plus any
accrued and unpaid interest, if the closing price of our common stock exceeds 130% of the conversion price over a specified period. On or after October 1, 2010, we may redeem the Convertible
Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of Convertible Senior Notes to be redeemed, plus any accrued and unpaid interest, irrespective of the
price of its common stock.

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Holders
may convert their Convertible Senior Notes at any time prior to the close of business on the business day immediately preceding their stated maturity, and holders may, upon the occurrence of
certain fundamental changes, and on October 1, 2010, October 1, 2015, and October 1, 2020, require us to repurchase all or a portion of their Convertible Senior Notes for cash in
an amount equal to 100% of the principal amount of such Convertible Senior Notes, plus any accrued and unpaid interest.

In
2008, we repurchased $6 million in principal amount of the Convertible Senior Notes on the open market and through privately negotiated transactions for $5.3 million
plus accrued interest of $109,347. Additionally, we expensed $241,965 of prepaid loan fees attributable to the repurchased Convertible Senior Notes. This resulted in a $458,535 gain on the early
extinguishment of debt.

In
April 2009, we repurchased $16.7 million in principal amount of the Convertible Senior Notes on the open market for $12.7 million plus accrued interest and prepaid loan
fees of $650,000. This repurchase resulted in a gain of $3.4 million on the early extinguishment of debt which was recorded in the second quarter of 2009. In October 2009, we repurchased
$9 million principal amount of the Convertible Senior Notes on the open market and through privately negotiated transactions for $8.7 million plus accrued interest and prepaid loan fees
of $340,000. This repurchase resulted in a loss of $26,000 on the early extinguishment of debt which will be recorded in the fourth quarter of 2009.

We
intend to continue to buy back a portion of the currently outstanding Convertible Senior Notes on the open market or in privately negotiated transactions, subject to market
conditions, applicable legal requirements and other factors.

Under
the terms of the Indenture, the Company may be required on October 1, 2010 to repurchase at the option of the Holders the principal amount outstanding of the Convertible
Senior Notes (up to approximately an aggregate of $63.6 million as at September 30, 2009). If the Holders exercise their right to require the Company to repurchase the Convertible Senior
Notes, the Company expects that it may need to secure new financing or raise additional capital through the issuance of securities to satisfy such payment obligation. If the Company is unable to
generate sufficient cash flow to satisfy its obligations, it may also seek additional capital by: (i) forward selling its crude oil; (ii) selling its working interest in properties; or
(iii) a combination of these actions, in addition to seeking financing or issuing
new debt or equity securities. The Company's management is currently is seeking to secure a new credit facility; however, there is no guarantee that the Company will be able to obtain a new credit
facility on satisfactory terms, if at all. There is no assurance that any such transactions will be completed, in which case the Company may not have sufficient liquid resources to satisfy its payment
obligation with respect to the Convertible Senior Notes. An inability to access replacement or additional sources of liquidity to fund our cash needs or fund the repayment of the Senior Convertible
Notes if the Holders exercise their repurchase rights could adversely affect our growth, our financial condition, our results of operations. It will be more difficult to obtain additional financing if
prevailing instability in the credit and financial markets continues.

An
inability to refinance or otherwise fund the Company's payment obligations with respect to the Convertible Senior Notes would result in an event of default under the Convertible
Senior Notes, which, if not cured or waived, would permit the holders of the Convertible Senior Notes to declare the outstanding principal, and any accrued and unpaid interest, if any, and any
premium, on all the Convertible Senior Notes to be immediately due and payable. If such an acceleration occurs, and the Company is not at that time able to repay, as a result of the actions above or
otherwise, or borrow sufficient funds to refinance, the Convertible Senior Notes, the Company may not be able to continue its operations and there would be doubt as to whether the Company could
continue as a going concern.



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.

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The following table sets forth our contractual obligations in thousands at September 30, 2009 for the periods shown:

Total

Less Than
One Year

One to
Three Years

Four to
Five Years

More Than
Five YearsLong-term debt

$
63,592

$


$
63,592

$


$
Lease commitments


2,276


358


1,310


608


Total contractual obligations

$
65,868

$
358

$
64,902

$
608

$



Contractual
obligations for long-term debt above does not include amounts for interest payments.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations is based upon the consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses. Our significant accounting policies are described in Note 2 to our consolidated financial statements included in
Form 10-K for the year ended December 31, 2008. We have identified below policies that are of particular importance to the portrayal of our financial position and results of
operations and which require the application of significant judgment by management. We analyze our estimates on a periodic basis and base our estimates on experience and various other assumptions that
we believe to be reasonable under the circumstances. Actual results may differ from these estimates using different assumptions or conditions. We believe the following critical accounting policies
affect our more significant judgments and estimates used in the preparation of our financial statements:



We account for our oil and natural gas exploration and development activities utilizing the successful efforts method of accounting.
Under this method, costs of productive exploratory wells, development dry holes and productive wells and undeveloped leases are capitalized. Oil and natural gas lease acquisition costs are also
capitalized. Exploration costs, including personnel costs, certain geological and geophysical expenses and delay rentals for oil and natural gas leases, are charged to expense as incurred. Exploratory
drilling costs are initially capitalized, but such costs are charged to expense if and when the well is determined not to have found reserves in commercial quantities. In most cases, a gain or loss is
recognized for sales of producing properties.

The
application of the successful efforts method of accounting requires management's judgment to determine the proper designation of wells as either developmental or exploratory, which
will ultimately determine the proper accounting treatment of the costs incurred. The results from a drilling operation can take considerable time to analyze, and the determination that commercial
reserves have been discovered requires both judgment and application of industry experience. Wells may be completed that are assumed to be productive and actually deliver oil and natural gas in
quantities insufficient to be economic, which may result in the abandonment of the wells at a later date. On occasion, wells are drilled which have targeted geologic structures that are both
developmental and exploratory in nature, and in such instances an allocation of costs is required to properly account for the results. Delineation seismic costs incurred to select development
locations within a productive oil and natural gas field are typically treated as development costs and capitalized, but often these seismic programs extend beyond the proved reserve areas and
therefore management must estimate the portion of seismic costs to expense as exploratory. The evaluation of oil and natural gas leasehold acquisition costs requires management's judgment to estimate
the fair value of exploratory costs related to drilling activity in a

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given
area. Drilling activities in an area by other companies may also effectively condemn leasehold positions.

The
successful efforts method of accounting can have a significant impact on the operational results reported when we enter a new exploratory area in hopes of finding oil and natural gas
reserves. The initial exploratory wells may be unsuccessful and the associated costs will be expensed as dry hole costs. Seismic costs can be substantial which will result in additional exploration
expenses when incurred.



Proved reserves are estimated quantities of crude oil, natural gas and natural gas liquids that geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are reserves that can be
expected to be recovered through existing wells with existing equipment and operating methods as well as oil and natural gas expected to be obtained through the application of fluid injection or other
improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery after testing by a pilot project or after the operation of an installed program has been confirmed
through production response that increased recovery will be achieved. Proved undeveloped reserves are reserves that are expected to be recovered from new wells on undrilled acreage or from existing
wells where a relatively major expenditure is required for recompletion. Proved undeveloped reserves on undrilled acreage are limited: (i) to those drilling units offsetting productive units
that are reasonably certain of production when drilled and (ii) to other undrilled units where it can be demonstrated with certainty that there is continuity of production from the existing
productive formation. We emphasize that the volume of reserves are estimates that, by their nature are subject to revision. The estimates are made using geological and reservoir data, as well as
production performance data. These estimates are reviewed annually and revised, either upward or downward, as warranted by additional performance data. These reserve
revisions result primarily from improved or a decline in performance from a variety of sources such as an addition to or a reduction in recoveries below or above previously established lowest known
hydrocarbon levels, improved or a decline in drainage from natural drive mechanisms, and the realization of improved or declined drainage areas. If the estimates of proved reserves were to decline,
the rate at which we record depletion expense would increase.

For
the year ended December 31, 2008, we had a downward reserve revision of 37.41%. At December 31, 2007 the price used for evaluating our oil reserves was $95.72 per
barrel as compared to the December 31, 2008 price of $34.72 per barrel. This 64% decrease in oil price had a severe impact on the economic life of our wells, but also on the discounted present
value at 10% and the standardized measure of proved reserves. This downward revision, which primarily affected our French oil reserves, was due to the following factors: (i) decrease in
economic life due to change in economics caused a net decrease of 1,682 MBbl; (ii) removing 12 proved undeveloped locations from the report caused a net decrease 1,889 MBbl;
(iii) negative reserve revisions resulted in a decrease in reserves of 405 MBbl; (iv) 14 wells were shut-in resulting in a decrease of 401 MBbl; (v) three drilled
locations in prior years resulted in one producing well which was non-commercial at December 31, 2008 causing a net decrease of 280 MBbl; (vi) one well was lost during
workover operations causing a net decrease 37 MBbl; (vii) 2008 production of 805 MBOE. In Hungary, we were able to secure a gas contract and were able to restore the reserves lost in 2007; this
resulted in an increase of 159 MBOE and in Romania due to the poor performance of the field resulted in a decrease of 54 MBOE. In Turkey, we had downward revisions of 390 MBOE, which was due to a
decrease in the economic life of the proved developed wells.

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The
following table shows our reserves at December 31, 2008, as if the sale of Hungary and Turkey had occurred on that date:

December 31,
2008

Proved
Reserves
Sold

Pro Forma at
December 31,
2008Proved developed:Oil (MBbl)


4,887


(502
)

4,385Gas (MMcf)


3,473


(3,473
)

Total (MBOE)


5,466


(1,081
)

4,385Proved undeveloped:Oil (MBbl)


770


(240
)

530Gas (MMcf)


8,040


(8,040
)

Total (MBOE)


2,110


(1,580
)

530Total proved:Oil (MBbl)


5,657


(742
)

4,915Gas (MMcf)


11,513


(11,513
)

Total (MBOE)


7,576


(2,661
)

4,915Discounted present value at 10% (pretax) (in thousands)(1)

$
61,321

$
(36,214
)
$
25,107Standardized measure of proved reserves (in thousands)

$
54,662

$
(36,205
)
$
18,563
  (1)The
discounted present value represents the discounted future cash flows attributable to our proved oil and natural gas reserves before income tax,
discounted at 10%. Although it is a non-GAAP measure, we believe that the presentation of the discounted present value is relevant and useful to our investors because it presents the
discounted future net cash flows attributable to our proved reserves prior to taking into account corporate future income taxes and our current tax structure. We use this measure when assessing the
potential return on investment related to our oil and natural gas properties. The standardized measure of discounted future net cash flows represents the present value of future cash flows
attributable to our proved oil and natural gas reserves after income tax, discounted at 10%.




We review our proved oil and natural gas properties for impairment on an annual basis or whenever events and circumstances indicate a
potential decline in the recoverability of their carrying value. We estimate the expected future cash flows from our proved oil and natural gas properties and compare these future cash flows to the
carrying value of the oil and natural gas properties to determine if the carrying value is recoverable. If the carrying value exceeds the estimated undiscounted future cash flows, we will adjust the
carrying value of the oil and natural gas properties to its fair value in the current period. The factors used to determine fair value include, but are not limited to, estimates of reserves, future
commodity prices, future production estimates, anticipated capital expenditures, and a discount rate commensurate with the risk associated with realizing the expected cash flows projected. Unproved
properties are reviewed quarterly to determine if there has been impairment of the carrying value, with any such impairment charged to expense in the period. Given the complexities associated with oil
and natural gas reserves estimate and the history of price volatility in the oil and natural gas markets, events may arise that will require us to record an impairment of our oil and natural gas
properties and there can be no assurance that such impairments will not be required in the future nor that they will not be material.

On
May 1, 2009, the Prime Minister of Turkey, announced a 25% reduction in the posted price of natural gas in Turkey which caused us to reevaluate the fair value of our SASB and
for management to

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estimate
that the fair value of the asset has been impaired by approximately $5.3 million at March 31, 2009; accordingly, recorded an impairment to reflect this change in fair value.

In
the third quarter of 2009, the Company decided not to proceed with the construction of the Kiha pipeline in Hungary, based on the poor results of the Tompa Deep well and the impending
sale of Toreador Hungary, which was completed on September 30, 2009. This resulted in an impairment of $5.4 million which represented our share of costs capitalized for the pipeline and
the previously drilled Kiha 15 well.



Future development costs include costs to be incurred to obtain access to proved reserves, including drilling costs and the
installation of production equipment. Future abandonment costs include costs to dismantle and relocate or dispose of our production equipment,
gathering systems, wells and related structures and restoration costs of land. We develop estimates of these costs for each of our properties based upon the type of production structure, depth of
water, reservoir characteristics, depth of the reservoir, market demand for equipment, currently available procedures and consultations with construction and engineering consultants. Because these
costs typically extend many years into the future, estimating these future costs is difficult and requires management to make estimates and judgments that are subject to future revisions based upon
numerous factors, including changing technology, the ultimate settlement amount, inflation factors, credit adjusted discount rates, timing of settlement and changes in the political, legal,
environmental and regulatory environment. We review our assumptions and estimates of future abandonment costs on an annual basis. The provisions of FASB Accounting Standards Codification (ASC) 410, "Asset Retirement and
Enviromental Obligations", requires that the fair value of a liability for an asset retirement obligation be recorded in the
period in which it is incurred and the corresponding cost capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value each
period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized.

Holding
all other factors constant, if our estimate of future abandonment costs is revised upward, earnings would decrease due to higher depreciation, depletion and amortization expense.
Likewise, if these estimates were revised downward, earnings would increase due to lower depreciation, depletion and amortization expense.



For financial reporting purposes, we generally provide taxes at the rate applicable for the appropriate tax jurisdiction. Because our
present intention is to reinvest the unremitted earnings in our foreign operations, excluding discontinued operations, we do not provide U.S. income taxes on unremitted earnings of foreign
subsidiaries. Management periodically assesses the need to utilize these unremitted earnings to finance our foreign operations. This assessment is based on cash flow projections that are the result of
estimates of future production, commodity prices and expenditures by tax jurisdiction for our operations. Such estimates are inherently imprecise since many assumptions utilized in the cash flow
projections are subject to revision in the future.

Management
also periodically assesses, by tax jurisdiction, the probability of recovery of recorded deferred tax assets based on its assessment of future earnings estimates. Such
estimates are inherently imprecise since many assumptions utilized in the assessments are subject to revision in the future.



We periodically utilize derivative instruments such as futures and swaps for purposes of hedging our exposure to fluctuations in the
price of crude oil. In accordance with the provisions of FASB

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Accounting
Standards Codification (ASC) 815,"Derivitives and Hedging", we have elected not to designate the derivative financial instruments to which
we are a party as hedges, and accordingly, we record such contracts at fair value and recognize changes in such fair value in current earnings as they occur. We determine the fair value of futures and
swap contracts based on the difference between their fixed contract price and the underlying market price at the determination date. The realized and unrealized gains and losses on derivatives are
recorded as a derivative fair value gain or loss in the income statement.



The functional currency for Turkey and Hungary is the U.S. Dollar and in France the functional currency is the Euro. Translation gains
or losses resulting from transactions in the New Turkish Lira in Turkey and the Forint in Hungary are included in loss from discontinued operations for the current period. Translation gains and losses
resulting from transactions in Euros are included in other comprehensive income for the current period. We periodically review the operations of our entities to ensure the functional currency of each
entity is the currency of the primary economic environment in which we operate.

RESULTS OF OPERATIONS

The discussion below, with the exception of the discussion under the heading "Discontinued Operations," relates to our corporate
activities in the United States and France and oil exploration and production operations in France. Certain prior-year amounts have been reclassified and adjusted to conform to the 2009
presentation and to present the operations of Turkey, Hungary and Romania as discontinued operations and are discussed under the headings "Discontinued Operations."



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

For the Three
Months Ended
September 302009

2008Production:Oil (MBbls):France


83


89Average Price:Oil $(/Bbl):France


62.19


108.00




Oil sales for the three months ended September 30, 2009 were $5.2 million, as compared to $9.6 million for the
three months ended September 30, 2008. This decrease is primarily due to the global decrease in oil prices during the three months ended September 30, 2009, as compared to the comparable
period of 2008. This price decrease resulted in a decrease of revenue of $3.8 million. Additionally, we had a decrease in oil production of 6 MBbls as a result of wells being shut in for
workovers and natural decline, resulting in a decrease in revenue of $600,000.

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The above table compares both volumes and prices received for oil for the three months ended September 30, 2009 and 2008. Oil prices are, and, we expect,
will continue to be, extremely volatile for the remainder of the fiscal year 2009. The results of our operations are highly dependent upon our oil production and the prices received from our oil
production, which are dependent on numerous factors beyond our control. Accordingly, significant changes to oil prices are likely to have a material impact on our financial condition, results of
operation, cash flows and revenue.



Lease operating expense was $1.5 million, or $18.07 per BOE produced for the three months ended September 30, 2009, as
compared to $2.3 million, or $26.15 per BOE produced,
for the three months ended September 30, 2008. This decrease is primarily due to a reduction in the cost of services provided by third-party vendors due to current economic conditions and the
delay in performing several workovers until a study of the best method to use is finalized.



Exploration expense for the three months ended September 30, 2009 was $22,000, as compared to $170,000 for the three months
ended September 30, 2008. This decrease is due primarily to the elimination of the exploration staff in the Dallas office due to the relocation of our headquarters to Paris.



Depreciation, depletion and amortization expense for the three months ended September 30, 2009 was $1.4 million or $16.87
per BOE produced, as compared to $1.2 million, or $13.43 per BOE produced for the three months ended September 30, 2008. This increase is primarily due to the lower proved reserves
assigned to our French assets at December 31, 2008 due to depressed oil prices and was partially offset by the decline in oil production of 6 MBbls in the third quarter of 2009 as compared to
the third quarter of 2008.



General and administrative expense, not including stock compensation expense, cost incurred due to the resignation of former officers
and the costs associated with the relocation of the corporate headquarters from Dallas, Texas to Paris, France, was $1.9 million for the three months ended September 30, 2009 compared
with $1.8 million for the three months ended September 30, 2008.



Stock compensation expense was $591,000 for the three months ended September 30, 2009 compared with $397,000 for the three
months ended September 30, 2008. This increase is due to the change in the structure of Board compensation, effective beginning in 2009, whereby directors receive a greater portion of their
compensation in stock rather than cash and a stock bonus that was granted to foreign office employees. The immediate vesting of grants made to employees in the Dallas office that have been terminated
has been classified as "Cost associated with the Dallas office/relocation of corporate headquarters from Dallas, Texas to Paris, France" and are not reflected in this amount.

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For the three months ended September 30, 2009, we incurred $656,000 in legal and consulting expenses due to the sale of the
Turkish and Hungarian subsidiaries.



For the three months ended September 30, 2009 we had $1 million of costs associated with the Dallas office/ relocation of
our headquarters to Paris, France. The major components are: 1) salaries and wages associated with Dallas office employees $95,000; 2) severance payments $265,000; 3) corporate
restructuring expenses $126,000; 4) travel associated with Dallas office employees $33,000; 5) relocation costs $322,000 and 5) Dallas office rent $73,000.

For
the three months ended September 30, 2008, we did not have any such relocation costs.



In August 2008, we repurchased $5.5 million of the Convertible Senior Notes for $4.9 million plus accrued interest of
$106,180. Additionally, we expensed $225,995 of prepaid loan fees that are attributable to the repurchased notes. This resulted in a $368,225 gain on the early extinguishment of debt. We intend to
continue to buy back a portion of the currently outstanding Convertible Senior Notes in the open market or in privately negotiated transactions, subject to market conditions, applicable legal
requirements and other factors.

For
the comparable period in 2009, we did not repurchase any of the Convertible Senior Notes and did not record any gain on the early extinguishment of debt.



We recorded a gain on oil and gas derivative contracts for the three months ended September 30, 2009 of $7,000, as compared to a
gain of $2.4 million for the three months ended September 30, 2008. The gain in 2008 represents the recognized gain on the commodity derivative contracts with Total Oil Trading.
Presented in the table below is a summary of the contracts entered into:

Type

Period

Barrels

Floor

Ceiling

GainCollar

July 1 - September 30, 2008


48,000

$
91.75

$
99.75

$
2,405


The
gain in 2009 represents the recognized gain on the commodity derivative contracts with Vitol S.A. Presented in the table below is a summary of the contracts entered into:

Type

Period

Barrels

Floor

Ceiling

GainCollar

July 1 - September 30, 2009


55,200

$
65.00

$
77.00

$
7Collar

October 1 - December 30, 2009


55,000

$
65.00

$
77.00







We recorded a gain on foreign currency exchange of $1,000 for the three months ended September 30, 2009 compared with a loss of
$17,000 for the three months ended September 30, 2008. This increase is primarily due to the stabilization of the Euro in the third quarter of 2009 as compared to the second quarter of 2008.

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Interest and other income was $250,000 for the three months ended September 30, 2009 as compared to interest and other income of
$196,000 for the three months ended September 30, 2008. For the three months ended September 30, 2009, our average cash balance was larger than our average cash balance for the three
months ended September 30, 2008.



Interest expense was $616,000 for the three months ended September 30, 2009, as compared to $1.1 million for the three
months ended September 30, 2008. This decrease is due to the retirement of $22.7 million in face value of the 5% Convertible Senior Notes since September 30, 2008.



In the fourth quarter of 2008 and during the first quarter of 2009, Toreador farmed out or sold all of its working interests in Romania
to three different companies and closed its office; thus, we no longer have any operational involvement in Romania. All revenues and expenses associated with the Romanian operation for the three
months ended September 30, 2009 and 2008 have been included in discontinued operations.

In
February 2009, the Board of Directors authorized management to retain Stellar Energy Advisors, based in London, UK, to manage a process to monetize its wholly owned subsidiary,
Toreador Turkey, including the Company's remaining 10% interest in the SASB, in addition to the onshore production, and 2.2 million net acres in exploration licenses that are currently held in
Turkey. On September 30, 2009, the Company entered into the Share Purchase Agreement with Tiway, pursuant to which the Company agreed to sell 100% of the outstanding shares of Toreador Turkey
to Tiway. The sale of
Toreador Turkey was completed on October 7, 2009. All revenues and expenses associated with the Turkish operation for the three months ended September 30, 2009 and 2008 and for the nine
months ended September 30, 2009 and 2008 have been included in discontinued operations.

Additionally,
on September 30, 2009, the Company entered into the Quota Purchase Agreement with RAG, pursuant to which the Company agreed to sell 100% of its equity interests in
Toreador Hungary to RAG. The sale of Toreador Hungary was completed on September 30, 2009. Therefore, all expenses associated with the Hungarian operation for the three months ended
September 30, 2009 and 2008 and for the nine months ended September 30, 2009 and 2008 have been included in discontinued operations.

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The
results of operations of assets in Romania, Turkey and Hungary have been presented as discontinued operations in the accompanying consolidated statement of operations. Results for
these assets reported as discontinued operations were as follows:

Three Months Ended
September 30,2009

2008Revenue:Oil and natural gas sales

$
1,632

$
8,054Operating costs and expenses:Lease operating expense


381


2,477Exploration expense


136


756Dry hole costs


1,318


Depreciation, depletion and amortization


52


8,788Impairment of oil and natural gas properties


5,425


General and administrative expense


1,720


580Loss on sale of properties and other assets


4,171


Total operating costs and expenses


13,203


12,601Operating loss


(11,571
)

(4,547
)Other income (expense)Foreign currency exchange gain


1,190


1,608Interest and other income


18


261Interest expense


(155
)

(1,030
)Net loss before income taxes


(10,518
)

(3,708
)Income tax provision





19Loss from discontinued operations

$
(10,518
)
$
(3,727
)


The
following tables present production and average unit prices for Turkey:

For the Three
Months Ended
September 30,2009

2008Production:Oil (MBbls):Turkey


14


14Gas (MMcf):Turkey


105


471MBOE:Turkey


32


93Average Price:Oil ($/Bbl):Turkey


58.65


111.33Gas ($/Mcf):Turkey


7.62


12.34$/BOE:Turkey


51.52


79.73


Oil
and natural gas sales from discontinued operations for the three months ended September 30, 2009 were $1.6 million, as compared to $8.1 million for the
comparable period in 2008. This decrease is

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primarily
due to the sale of our 26.75% interest to Petrol Ofisi, which was completed in March 2009 and the $28.21 per BOE decline in oil and natural gas prices since the comparable period in 2008.

For
the three months ended September 30, 2009 we recorded dry hole costs of $1.3 million in Turkey, which represents the Company's share of the drilling costs that exceed
the carry of the Durusu#1 well, which as drilled in offshore Turkey. Additionally, due to the Company's intention not to proceed with the Hungarian pipeline project, we recorded an impairment of
$5.4 million which represents our share of the pipeline cost and the capitalized cost of the previously drilled Kiha 15 well.

The
sale of Toreador Hungary resulted in a loss on sale of $4.2 million. This amount is comprised of cash received at closing $5.4 million, less the net book value of
assets $12.9 million. plus the reclassification of other comprehensive income from the balance sheet totaling $3.3 million.



The most significant element of comprehensive income, other than net income, is foreign currency translation. For the three months
ended September 30, 2009, we had accumulated an unrealized loss of $2 million as compared to an unrealized loss of $7.1 million for the comparable period in 2008. This change is
primarily due to the strengthening of the U.S. Dollar compared to the Euro for the three months ended September 30, 2009 versus September 30, 2008.

RESULTS OF OPERATIONS



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

For the Nine
Months Ended
September 302009

2008Production:Oil (MBbls):France


248


278Average Price:Oil ($/Bbl):France


51.93


105.81




Oil sales for the nine months ended September 30, 2009 were $13.1 million, as compared to $29.5 million for the
nine months ended September 30, 2008. This decrease is primarily due to the global decrease in oil prices during the nine months ended September 30, 2009, as compared to the comparable
period of 2008. This resulted in a reduction of revenue of $13.3 million. Additionally, we had a decrease in oil production of 30 MBbls as a result of wells being shut in for workovers and
natural decline, resulting in a decrease in revenue of $3.1 million.

The
above table compares both volumes and prices received for oil for the nine months ended September 30, 2009 and 2008. Oil prices are, and, we expect, will continue to be,
extremely volatile for the remainder of the fiscal year 2009. The results of our operations are highly dependent upon our oil production and upon the prices received from our oil production, which are
dependent on numerous factors beyond our control. Accordingly, significant changes to oil prices, or material changes in our oil

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production,
are likely to have a material impact on our financial condition, results of operation, cash flows and revenue.



Lease operating expense was $5 million, or $20.16 per BOE produced, for the nine months ended September 30, 2009, as
compared to $6.9 million, or $24.65 per BOE produced for the nine months ended September 30, 2008. This decrease is primarily due to a reduction in the cost of services provided by
third-party vendors due to current economic conditions, the strengthening of the U. S. Dollar compared to 2008 and the delay in performing several workovers until a study of the best method to use is
finalized.



Exploration expense for the nine months ended September 30, 2009 was $130,000, as compared to $918,000 for the nine months ended
September 30, 2008. This decrease is due primarily to elimination of the exploration staff in the Dallas office due to the relocation of our headquarters to Paris.



Depreciation, depletion and amortization expense for the nine months ended September 30, 2009 was $4.5 million or $18.15
per BOE produced, as compared to $3.5 million, or $12.55 per BOE produced for the nine months ended September 30, 2008. This increase is primarily due to the lower proved reserves
assigned to our French assets at December 31, 2008 due to depressed oil prices and was partially offset by the decline in oil production of 30MBbls for the nine months ended
September 30, 2009 as compared to the nine months ended September 30, 2008.



For the nine months ended September 30, 2009, we did not incur any impairment charges, as compared to $2.3 million for
the nine months ended September 30, 2008. The impairment charge is for the undeveloped leasehold costs in Trinidad, which was due to management's decision to exit Trinidad and discontinue our
association with our registered agent in the country.



General and administrative expense, not including stock compensation expense, cost incurred due to the resignation of former officers
and the costs associated with the relocation of the corporate headquarters from Dallas, Texas to Paris, France, was $6 million for the nine months ended September 30, 2009 compared to
$7.2 million for the nine months ended September 30, 2008. This decrease is primarily due to the reduction in staff of the Dallas office in 2009 due to the relocation of our corporate
headquarters to Paris, France.



Stock compensation expense was $2.8 for the nine months ended September 30, 2009 compared to $2.3 million for the nine
months ended September 30, 2008. This increase is primarily due to the change in the structure of Board compensation, whereby directors
receive a greater portion of their compensation in stock rather than cash, and a stock bonus that was granted to foreign office employees. The immediate vesting of grants made to employees in the
Dallas office that have been terminated, has been classified as "Cost associated with the Dallas office/relocation of corporate headquarters from Dallas, Texas to Paris, France" and are reflected in
this amount.

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The Company and Nigel Lovett, our former President and Chief Executive Officer, entered into a Separation and Mutual Release Agreement
(the "Lovett Release") in connection with his resignation from the Company in January 2009. Pursuant to the Lovett Release, Toreador amended certain terms and conditions of Mr. Lovett's 2008
employment agreement (the "2008 Employment Agreement") with Toreador. The terms of the 2008 Employment Agreement, as amended, provide for Toreador to: (i) pay Mr. Lovett all unpaid
compensation earned but not paid, (ii) pay Mr. Lovett certain severance payments totaling $720,000 to be paid in 24 equal monthly installments, (iii) issue 90,000 shares of
Toreador common stock to Mr. Lovett, and (iv) vest 6,800 shares of Toreador restricted stock held by Mr. Lovett. The cost associated with the Lovett Release totaled $832,000,
which was recorded in the first quarter of 2009.

In
June 2008, Michael FitzGerald resigned as Executive Vice PresidentExploration and Production and Edward Ramirez resigned as Senior Vice PresidentExploration
and Production. Their Separation and Release Agreements provided for (i) each to receive one year of salary which together resulted in an expense of $600,000, and (ii) for
Mr. FitzGerald the immediate vesting of 5,000 shares of restricted stock grants and for Mr. Ramirez the immediate vesting of 7,000 shares of restricted stock grants which together
resulted in an expense of $35,000.

In
addition in June 2008, three other employees resigned, which collectively resulted in an additional $304,000 of expense.



For the nine months ended September 30, 2009, we incurred $765,000 in legal and consulting expenses due to the sale of the
Turkish and Hungarian subsidiaries.



For the nine months ended September 30, 2009 we had $4.2 million of costs associated with the Dallas office/ relocation
of our headquarters to Paris, France. The major components are: 1) salaries and wages associated with Dallas office employees $901,000; 2) severance payments $1.7 million;
3) corporate restructuring expenses $752,000; 4) travel associated with Dallas office employees $309,000; 5) relocation costs $322,000 and 6) Dallas office rent $206,000.
For the nine months ended September 30, 2008, we did not have any such relocation costs.



Gain on oil and gas derivative contracts for the nine months ended September 30, 2009 was $7,000, as compared to a loss of
$1.8 million for the nine months ended September 30, 2008. The loss in 2008 represents the recognized loss on the commodity derivative contracts with Total Oil Trading. Presented in the
table below is a summary of the contracts entered into:

Type

Period

Barrels

Floor

Ceiling

(Gain) LossCollar

January 1 - March 31, 2008


48,000

$
84.75

$
92.75

$
19Collar

April 1 - June 30, 2008


48,000

$
92.25

$
100.25


2,239Collar

July 1 - September 30, 2008


48,000

$
91.75

$
99.75


(452
)$
1,806


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The
gain in 2009 represents the recognized gain on the commodity derivative contracts with Vitol S.A. Presented in the table below is a summary of the contracts entered into:

Type

Period

Barrels

Floor

Ceiling

GainCollar

July 1 - September 30, 2009


55,200

$
65.00

$
77.00

$
7




We recorded a loss on foreign currency exchange of $131,000 for the nine months ended September 30, 2009 compared with a gain of
$1 million for the nine months ended September 30, 2008. This decrease is primarily due the stabilization of the Euro in the first nine months of 2009 as compared to the comparable
period 2008.



In April 2009, we repurchased $16.7 million principal amount of the Convertible Senior Notes on the open market and through
privately negotiated transactions for $12.7 million plus accrued interest and prepaid loan fees of $650,000. This repurchase resulted in a gain of $3.4 million on the early
extinguishment of debt which was recorded in the second quarter of 2009. For the nine months ended September 30, 2008, we repurchased $5.5 million principal amount of the
Convertible Senior Notes for $4.9 million plus accrued interest of $106,180 and $222,995 of prepaid loan fees that are attributable to the repurchased Convertible Senior Notes. This resulted in
a gain on the early extinguishment of debt of $368,225. We intend to continue to buy back a portion of the currently outstanding Convertible Senior Notes in the open market or in privately negotiated
transactions, subject to market conditions, applicable legal requirements and other factors.



Interest and other income was $726,000 for the nine months ended September 30, 2009 as compared to interest and other income of
$598,000 for the nine months ended September 30, 2008. The increase is primarily due to average cash balance being higher for the nine months ended September 30, 2009 compared to the
nine months ended September 30, 2008, primarily due to our recent dispositions in Turkey and Hungary and related reduction in capital expenditures.



Interest expense was $2.6 million for the nine months ended September 30, 2009, as compared to $3.1 million for
the nine months ended September 30, 2008. This decrease is due to the retirement of $22.7 million in face value of the 5% Convertible Senior Notes since September 30, 2008.



In the fourth quarter of 2008 and during the first quarter of 2009, Toreador farmed out or sold all of its working interests in Romania
to three different companies and closed its office; thus, we no longer have any operational involvement in Romania. All revenues and expenses associated with the Romanian operation for the three
months ended September 30, 2009 and 2008 and for the nine months ended September 30, 2009 and 2008 have been included in discontinued operations.

In
February 2009, the Board of Directors authorized management to retain Stellar Energy Advisors, based in London, UK, to manage a process to monetize its wholly owned subsidiary,
Toreador Turkey, including the Company's remaining 10% interest in the SASB, in addition to the onshore production, and 2.2 million net acres in exploration licenses that are currently held in
Turkey. On September 30, 2009, the Company entered into the Share Purchase Agreement with Tiway, pursuant to which the Company agreed to sell 100% of the outstanding shares of Toreador Turkey
to Tiway. The

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sale
of Toreador Turkey was completed on October 7, 2009. All revenues and expenses associated with the Turkish operation for the three months ended September 30, 2009 and 2008 and for
the nine months ended September 30, 2009 and 2008 have been included in discontinued operations.

Additionally,
on September 30, 2009, the Company entered into the Quota Purchase Agreement with RAG, pursuant to which the Company agreed to sell 100% of its equity interests in
Toreador Hungary to RAG. The sale of Toreador Hungary was completed on September 30, 2009. Therefore, all expenses associated with the Hungarian operation for the three months ended
September 30, 2009 and 2008 and for the nine months ended September 30, 2009 and 2008 have been included in discontinued operations.

The
results of operations of assets in Romania, Turkey and Hungary have been presented as discontinued operations in the accompanying consolidated statement of operations. Results for
these assets reported as discontinued operations were as follows:

Nine Months
Ended
September 30,2009

2008Revenue:Oil and natural gas sales

$
4,545

$
22,062Operating costs and expenses:Lease operating expense


886


6,277Exploration expense


868


1,979Dry hole costs


1,318


Depreciation, depletion and amortization


157


26,463Impairment of oil and natural gas properties


10,725


53,479General and administrative expense


3,424


2,045Gain on sale of properties and other assets


(1,675
)

Total operating costs and expenses


15,703


90,243Operating loss


(11,158
)

(68,181
)Other income (expense)Foreign currency exchange gain


3,822


1,953Interest and other income


414


395Loss on early extinguishment of debtrevolving credit facility


(4,881
)

Interest expense


(185
)

(3,266
)Net loss before income taxes


(11,988
)

(69,099
)Income tax benefit





(2,871
)Loss from discontinued operations

$
(11,988
)
$
(66,228
)


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Table of Contents

The
following tables present production and average unit prices for Turkey:

For the Nine
Months Ended
September 30,2009

2008Production:Oil (MBbls):Turkey


39


42Gas (MMcf):Turkey


301


1,448MBOE:Turkey


89


284Average Price:Oil ($/Bbl):Turkey


49.79


105.14Gas ($/Mcf):Turkey


8.64


10.75$/BOE:Turkey


50.94


70.54


Oil
and natural gas sales from discontinued operations for the nine months ended September 30, 2009 were $4.5 million, as compared to $22.1 million for the nine
months ended September 30, 2008. This decrease is primarily due to the sale of our 26.75% interest in the SASB to Petrol Ofisi, which was completed in March 2009, and the $18.6 per BOE decline
in oil and natural gas prices since the comparable period in 2008.

For
the nine months ended September 30, 2009 we recorded dry hole costs of $1.3 million in Turkey, which represents the Company's share of the drilling costs that exceed
the carry of the Durusu#1 well, which was drilled in offshore Turkey. Additionally, for the nine months end September 30, 2009 we recorded an impairment of $10.7 million due to
1) the Company's decision not to proceed with the Kiha pipeline in Hungary, we recorded an impairment of $5.4 million, which represents our share of the pipeline cost and the capitalized
cost of the pipeline and the previously drilled Kiha 15 well and 2) we recorded a $5.3 million impairment in Turkey due to the decline in the fair market value of the Company's interest
in the South Akcakoca Sub-Basin assets, which was due to a 25% reduction in the posted sales price of natural gas produced in Turkey.

The
sale of the Romanian assets resulted in a gain on sale of $5.8 million and the sale of the Hungarian entity resulted in a loss of $4.2 million or a net gain on sale of
assets totaling $1.7 million.



The most significant element of comprehensive income, other than net income, is foreign currency translation. For the nine months ended
September 30, 2009, we had accumulated an unrealized loss of $4.3 million, after reclassifying $8.6 million to discontinued operations associated with the exiting of Hungary and
Romania, as compared to an unrealized income of $2.3 million for the nine months ended September 30, 2008. This is primarily due to the weakening of the U.S. Dollar compared to the Euro
in 2009.

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Table of Contents

The
functional currency of our operations in France is the Euro. The functional currency in Turkey and Hungary is the U.S. Dollar. The exchange rates at September 30, 2009 and
2008 were:

September 30,2009

2008Euro

$
1.4643

$
1.4303New Turkish Lira

$
0.6737

$
0.7887Hungarian Forint

$
0.0054

$
0.0059




We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on
our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company's market risk during the nine months ended September 30, 2009. For additional
information, refer to the market risk disclosure in Item 7A as presented in the Company's 2008 Annual Report on Form 10-K which was initially filed with the SEC on
March 16, 2009 and amended on April 16, 2009.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange) that are designed to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the SEC.

We
carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer of the effectiveness
of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures as of September 30, 2009 were effective.

Changes in Internal Control over Financial Reporting

In the quarter ended September 30, 2009, due to the announced relocation of the headquarters to Paris, France, we eliminated
three positions in our accounting and finance department. The responsibility and duties of these individuals were assumed by the remaining personnel. Management believes that the change does not
materially affect our system of internal control due to compensating controls that are currently in effect.

Effective
for the quarter ended September 30, 2009, the Company has engaged a three-person team of external accountants at Dauge-Fidelio, an independent member of Crowe Horwath
International, including one at the partner level, to perform the job functions that were previously being performed by the accounting and finance employees whose positions were eliminated in
connection with the relocation of the Company's headquarters from Dallas, Texas to Paris, France. In addition, the Company's former Chief Financial Officer has been retained in an advisory role
through March 2010 to
assist in the oversight of the Company's financial reporting and ensure a smooth transition of such responsibilities to the Company's newly appointed Chief Financial Officer, effective
September 15, 2009.

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Table of Contents

PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

See Note 11, which is incorporated into this "Item 1. Legal Proceedings" by reference

ITEM 1A.RISK FACTORS

There have been no material changes to the risk factors previously discussed in the Company's annual report on
Form 10-K for the year ended December 31, 2008, which was initially filed with the SEC on March 16, 2009, and was amended on April 16, 2009.

ITEM 6.EXHIBITS

Exhibit
Number

Description

Incorporation by Reference10.1

Employment Agreement by and between the Company and Craig McKenzie dated August 24, 2009.

Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on August 24, 2009.10.2

Employment Agreement by and between the Company and Marc Sengès dated September 15, 2009.

Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on September 17, 2009.10.3

Quoin Purchase Agreement, dated September 30, 2009, between the Company and RAG (Rohöl-Aufsuchungs Aktiengesellschaft).

Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on October 6, 2009.10.4

Share Purchase Agreement dated September 30, 2009 among the Company, Tiway Oil BV and Tiway Oil AS.

Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on October 6, 2009.31.1

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.

Filed Herewith.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.

Filed Herewith.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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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-Q
report to be signed on its behalf by the undersigned thereunto duly authorized.

TOREADOR RESOURCES CORPORATIONNovember 9, 2009

/s/ CRAIG M. MCKENZIE Craig M. McKenzie President and Chief Executive OfficerNovember 9, 2009

/s/ MARC SENGÈS Marc Sengès Chief Financial Officer


50

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