<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC  20549

                                   FORM 10-Q

   (Mark one)

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

               For the quarterly period ended SEPTEMBER 30, 1996

                                       OR

      [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
                            PERIOD FROM ____ TO ____

                         Commission file number 0-2517


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


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

        530 Preston Commons West
           8117 Preston Road
             Dallas, Texas                                  75225
----------------------------------------                  ----------
(Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code:  (214) 369-0080
                                                   -----------------------

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

                    Yes      X                   No     
                            ---                         ---

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

              Class                        Outstanding at September 30, 1996
-----------------------------------        ---------------------------------
  Common Stock, $.15625 par value                       5,175,971

<PAGE>   2
                         PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

TOREADOR ROYALTY CORPORATION

CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
                                                   September 30,   September 30,   December 31,
                                                       1996            1995            1995
                                                   ------------    ------------    ------------
                                                    (UNAUDITED)     (UNAUDITED)
<S>                                                <C>             <C>             <C>         
ASSETS
Current Assets:
    Cash and cash equivalents                      $  3,215,035    $  3,216,002    $  2,791,575
    Marketable securities, at market value                 --           727,650         661,501
    Accounts receivable                                 174,722         128,968         168,746
    Federal income tax receivable                        54,899          68,014          87,450
    Prepaid expenses and deposits                         4,324          61,228          22,172
                                                   ------------    ------------    ------------

      Total current assets                            3,448,980       4,201,862       3,731,444
                                                   ------------    ------------    ------------

Properties and equipment, less accumulated
        depreciation, depletion and amortization      3,282,925       2,869,674       3,201,283
Other assets                                            103,784          58,465         118,325
                                                   ------------    ------------    ------------

      Total assets                                 $  6,835,689    $  7,130,001    $  7,051,052
                                                   ============    ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable and accrued liabilities       $     78,270    $     96,574    $    193,238
    Federal income taxes payable                         64,971            --              --
                                                   ------------    ------------    ------------

      Total current liabilities                         143,241          96,574         193,238

Deferred tax liabilities                                 81,198         241,372          47,329
                                                   ------------    ------------    ------------
      Total liabilities                                 224,439         337,946         240,567
                                                   ------------    ------------    ------------

Stockholders' equity:
    Preferred stock, $1.00 par value, 4,000,000
        shares authorized; none issued                     --              --
    Common stock, $.15625 par value, 10,000,000
        shares authorized; 5,349,071 issued             835,792         835,792         835,792
    Capital in excess of par value                    3,560,042       3,560,042       3,560,042
    Retained earnings                                 2,653,363       2,021,530       2,115,733
    Net unrealized gain on marketable securities           --           391,435         353,268
                                                   ------------    ------------    ------------
                                                      7,049,197       6,808,799       6,864,835
    Less 173,100 shares (September 30, 1996),
        20,500 shares (December 31, 1995)
        and 5,700 shares (September 30, 1995) of
        common stock in treasury, at cost              (437,947)        (16,744)        (54,350)
                                                   ------------    ------------    ------------
      Total stockholders' equity                      6,611,250       6,792,055       6,810,485
                                                   ------------    ------------    ------------
      Total liabilities and stockholders' equity   $  6,835,689    $  7,130,001    $  7,051,052
                                                   ============    ============    ============
</TABLE>


The Company uses the successful efforts method of accounting for its oil and
gas producing activities.

See accompanying notes to the consolidated financial statements.




                                     - 2 -
<PAGE>   3
TOREADOR ROYALTY CORPORATION

CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
                                              For the Three Months Ended    For the Nine Months Ended
                                                      September 30,                September 30,
                                              --------------------------    -------------------------
                                                   1996          1995           1996          1995
                                               -----------   -----------    -----------   -----------
<S>                                            <C>           <C>            <C>           <C>        
Revenues:
    Oil and gas sales                          $   498,484   $   315,657    $ 1,485,645   $   958,721
    Lease bonuses and rentals                       97,434        22,010         97,595        63,906
    Interest and other income                       37,044        41,627        143,059       159,454
                                               -----------   -----------    -----------   -----------

      Total revenues                               632,962       379,294      1,726,299     1,182,081

Costs and expenses:
    Lease operating expense                        111,356        83,279        329,822       245,213
    Dry holes and abandonments                       3,825          --           93,016       175,378
    Depreciation, depletion and amortization        54,252        69,317        161,548       179,280
    Geological and geophysical                      61,317        66,629        176,037       178,709
    General and administrative                     230,651       224,220        674,439       908,128
                                               -----------   -----------    -----------   -----------

      Total costs and expenses                     461,401       443,445      1,434,862     1,686,708
                                               -----------   -----------    -----------   -----------

Income from operations                             171,561       (64,151)       291,437      (504,627)

Other income:
    Gain from sales of marketable securities       151,016          --          526,567          --
                                               -----------   -----------    -----------   -----------

Income (loss) before federal income taxes          322,577       (64,151)       818,004      (504,627)

Provision for federal income tax expense           114,924          --          280,374          --
                                               -----------   -----------    -----------   -----------

Net income (loss)                              $   207,653   $   (64,151)   $   537,630   $  (504,627)
                                               ===========   ===========    ===========   ===========

Income per share                               $      0.04   $     (0.01)   $      0.10   $     (0.09)
                                               ===========   ===========    ===========   ===========

Weighted average shares outstanding              5,181,834     5,343,371      5,234,290     5,343,371
                                               ===========   ===========    ===========   ===========
</TABLE>



See accompanying notes to the consolidated financial statements.





                                     - 3 -
<PAGE>   4
TOREADOR ROYALTY CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
                                                               For the Three Months Ended       For the Nine Months Ended
                                                                     September 30,                   September 30,
                                                              ----------------------------    ----------------------------
                                                                  1996            1995            1996            1995
                                                              ------------    ------------    ------------    ------------
<S>                                                           <C>             <C>             <C>             <C>          
Cash flows from operating activities:
    Net income (loss)                                         $    207,653    $    (64,151)   $    537,630    $   (504,627)
    Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation, depletion and amortization                      54,252          69,317         161,548         179,280
      Dry holes and abandonments                                     3,825            --            93,016         175,378
      Gain on sale of marketable securities                       (151,016)           --          (526,567)           --
      Decrease (increase) in accounts receivable                     4,197          22,663          (5,976)         31,733
      Decrease in federal income tax receivable                       --              --            32,551            --
      Pension funding in excess of expense                          13,750              (1)        118,325              (1)
      Decrease (increase) in prepaid expenses and deposits           1,254            --           (85,936)           --
      Decrease in accounts payable and accrued liabilities          (6,743)         (8,314)       (114,968)        (68,196)
      Increase in federal income taxes payable                      60,987            --            64,971            --
      Deferred tax expense                                          54,386            --           215,844            --
                                                              ------------    ------------    ------------    ------------
        Net cash provided (used) by operating activities           242,545          19,514         490,438        (186,433)
                                                              ------------    ------------    ------------    ------------

Cash flows from investing activities:
     Expenditures for oil and gas property and
     equipment                                                     (80,623)        (21,105)       (335,806)       (487,887)
     Proceeds from sale of assets and marketable securities        181,841            --           652,825            --
     Purchase of furniture and fixtures                               --              --              (400)         (3,344)
                                                              ------------    ------------    ------------    ------------

        Net cash used by investing activities                      101,218         (21,105)        316,619        (491,231)
                                                              ------------    ------------    ------------    ------------

Cash flows from financing activities:
    Purchase of treasury stock                                     (77,300)           --          (383,597)           --
                                                              ------------    ------------    ------------    ------------

        Net cash provided (used) by
        financing activities                                       (77,300)           --          (383,597)           --
                                                              ------------    ------------    ------------    ------------

Net increase (decrease) in cash and
cash equivalents                                                   266,463          (1,591)        423,460        (677,664)

Cash and cash equivalents, beginning of period                   2,948,572       3,217,593       2,791,575       3,893,666
                                                              ------------    ------------    ------------    ------------

Cash and cash equivalents, end of period                      $  3,215,035    $  3,216,002    $  3,215,035    $  3,216,002
                                                              ============    ============    ============    ============

Supplemental schedule of cash flow information:
    Cash paid (received) during the period for:
      Income taxes                                            $       --      $       --      $    (32,551)   $       --
</TABLE>


See accompanying notes to the consolidated financial statements.





                                     - 4 -
<PAGE>   5
                          TOREADOR ROYALTY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For the three and nine months ended September 30, 1996


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       These consolidated financial statements should be read in the context of
the consolidated financial statements and notes thereto filed with the
Securities and Exchange Commission in Toreador Royalty Corporation's (the
"Company") 1995 Annual Report on Form 10-K.  In the opinion of the Company, the
information furnished herein reflects all adjustments consisting of only normal
recurring adjustments, necessary for a fair presentation of the results of the
interim periods reported herein.  Operating results from the interim period may
not necessarily be indicative of the results for the year ended December 31,
1996.  Certain previously reported financial information has been reclassified
to conform to the current period's presentation.

NOTE 2 - MARKETABLE SECURITIES

       During the quarter the Company sold 25,840 units of the San Juan Basin
Royalty Trust, eliminating this position.  For the three months ended September
30, 1996, the Company realized a gain of $151,016 from this sale.

NOTE 3 - NON-PRODUCING MINERAL AND ROYALTY INTERESTS

       Principal properties include mineral fee interests acquired by the
Company during 1951 and 1958.  These interests totaled approximately 530,000
net mineral acres underlying approximately 870,000 surface acres in the Texas
Panhandle and West Texas.  It is recognized that the ultimate realization of
the investment in these properties is dependent upon future exploration and
development operations which are dependent upon satisfactory leasing and
drilling arrangements with others.  Additionally, the Company owns working or
royalty interests in Texas, New Mexico, Oklahoma, Arkansas, Louisiana and
Colorado.





                                     - 5 -
<PAGE>   6





                          TOREADOR ROYALTY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For the three and nine months ended September 30, 1996


NOTE 4 - INTEREST AND OTHER INCOME

       Items in interest and other income consist of:

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                               September 30,
                                                           ---------------------
                                                            1996          1995
                                                           -------       -------
<S>                                                        <C>           <C>    
Interest - Certificates of Deposit and
       U. S. Treasury Bills                                $36,766       $34,062
Distribution from Grantor Trust:
       San Juan Basin Royalty Trust                            278         7,565
Other income                                                  --            --   
                                                           -------       -------

                                                           $37,044       $41,627
                                                           =======       =======
</TABLE>





                                     - 6 -
<PAGE>   7





                          TOREADOR ROYALTY CORPORATION

             For the three and nine months ended September 30, 1996


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

       Disclosures Regarding Forward-Looking Statements

       This report on Form 10-Q includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  All statements
other than statements of historical facts included in this Form 10-Q,
including, without limitation, statements contained in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position, business strategy, plans and
objectives of management of the Company for future operations, and industry
conditions, are forward-looking statements.  Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable,
it can give no assurance that such expectations will prove to have been
correct.  Any forward-looking statements herein are subject to certain risks
and uncertainties inherent in petroleum exploration, development and
production, including, but not limited to the risk that no commercially
productive oil and gas reservoirs will be encountered; inconclusive results
from 3-D seismic projects; delays or cancellation of drilling operations as a
result of a variety of factors; volatility of oil and gas prices due to
economic and other conditions; intense competition in the oil and gas industry;
operational risks (e.g., fires, explosions, blowouts, cratering and loss of
production); insurance coverage limitations and requirements; and potential
liability imposed by intense governmental regulation of oil and gas production;
all of which are beyond the control of the Company.  Any one or more of these
factors could cause actual results to differ materially from those expressed in
any forward-looking statement.  All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements disclosed in
this paragraph and otherwise in this report.

       Liquidity and Capital Resources  

       Historically, most of the exploration activity on the Company's acreage
has been funded and conducted by other oil companies and this activity is
expected to continue.  Exploration activity typically generates lease bonus and
option income to the Company.  If drilling is successful, the Company receives
royalty income from the oil or gas production but bears none of the capital or
operating costs.  In order to accelerate the evaluation of its acreage as well
as increase its ownership in any reserves discovered, the Company intends to
increase its level of participation in exploring its acreage by acquiring
working interests.  The extent to which the





                                     - 7 -
<PAGE>   8





                          TOREADOR ROYALTY CORPORATION

             For the three and nine months ended September 30, 1996

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

Company may acquire working interests will depend on the availability of
outside capital and cash flow from operations.  Currently, the primary sources
of capital for the financing of the Company's operations are cash flow provided
from revenues generated by its proportionate share in oil and natural gas sales
and existing cash, including that from a private offering completed in 1994.
To the extent cash flow from operations does not significantly increase and
external sources of capital are limited or unavailable, the Company's ability
to make the capital investment to participate in 3-D seismic surveys and
increase its interest in projects on its acreage will be limited.  Future funds
are expected to be provided through production from existing producing
properties and new producing properties that may be discovered through
exploration of the Company's acreage by third parties or by the Company itself.
Funds may also be provided through external financing in the form of debt or
equity.  There can be no assurance as to the extent and availability of these
sources of funding.

       The Company has no debt and maintains its excess cash funds in interest-
bearing deposits and commercial paper.  The Company is not aware of any
demands, commitments or events which will result in its liquidity increasing or
decreasing in a material way.  From time to time, the Company may receive lease
bonuses that cannot be anticipated and, when funds are available, the Company
may elect to participate in exploratory ventures.  The Company also may acquire
producing oil and gas assets which could require the use of debt.

       Management believes that sufficient funds are available internally to
meet anticipated capital requirements for fiscal 1996.

       Since December 4, 1995, the Company, as of September 30, 1996, has used
$421,203.12 of its cash reserves to purchase 167,400 shares of its Common
Stock.  These purchases were made pursuant to stock repurchase programs
authorized by the Board of Directors on October 10, 1995, of up to 100,000
shares of Common Stock and a second stock repurchase program on April 22, 1996,
of up to 150,000 shares of common stock.  As of November 8, 1996, the Company
has purchased an aggregate of 75,400 shares at a purchase price of $200,750.00
under the second repurchase program.  The repurchases of the Company's shares
of Common Stock were made in unsolicited open-market purchases, at market (not
premium) prices, without fixed terms and not contingent upon the tender of a
fixed minimum number of shares or in response to a third party bid and
otherwise in accordance with Rule 10b-18 under the Securities Exchange Act of
1934, as amended.





                                     - 8 -
<PAGE>   9





                          TOREADOR ROYALTY CORPORATION

             For the three and nine months ended September 30, 1996

RESULTS OF OPERATIONS

   THREE MONTHS ENDED SEPTEMBER 30, 1996 VS       
      THREE MONTHS ENDED SEPTEMBER 30, 1995

       Revenues for the third quarter 1996 were $632,962 versus $379,294 for
the same period in 1995.  Oil and gas sales were $498,484 on volumes of 15,568
BBLs and 85,049 MCF versus $315,657 on volumes of 14,833 BBLs and 60,054 MCF in
1995.  The $182,827 increase in oil and gas sales resulted from oil and gas
volumes increasing 5% and 41.6%, respectively, and higher oil and gas prices.
Oil prices increased 26.2% to $20.29/BBL in 1996 from $16.08/BBL in 1995.  Gas
prices increased 66.7% to $2.15/MCF in 1996 from $1.29/MCF in 1995.  Lease
bonuses and rentals were $97,434 in 1996 versus $22,010 in 1995.  The $75,424
increase was primarily due to bonuses received from two exploratory agreements
completed in the third quarter encompassing a portion of the Company's
minerals.  Interest and other income was $37,044 in 1996 versus $41,627 in
1995.

       Costs and expenses were $461,401 in 1996 versus $443,445 in 1995.  Lease
operating expenses increased to $111,356 in 1996 from $83,279 in 1995 due to
the acquisitions made in 1995.  Depreciation, depletion and amortization
decreased 21.7% to $54,252 in 1996 from $69,317 in 1995.  Geological and
geophysical expenses decreased 8.0% to $61,317 in 1996 from $66,629 in 1995.
General and administrative expenses increased to $230,651 from $224,220 a year
ago.

       The Company recognized net income of $207,653 or $0.04 per share, for
the third quarter of 1996 versus a net loss of $64,151, or $0.01 per share, for
the same period in 1995. Net income for the third quarter of 1996 includes a
$151,016 gain from the sale of marketable securities compared to none for the
same period in 1995.  Net income from operations after federal income taxes,
excluding the gain from the sale of marketable securities was $121,402 or $0.02
per share.





                                     - 9 -
<PAGE>   10





                          TOREADOR ROYALTY CORPORATION

             For the three and nine months ended September 30, 1996

RESULTS OF OPERATIONS 

NINE MONTHS ENDED SEPTEMBER 30, 1996 VS       
      NINE MONTHS ENDED SEPTEMBER 30, 1995

       Revenues for the nine months ended September 30, 1996 increased 46.0% to
$1,726,299 compared to $1,182,081 for 1995.  Oil and gas sales increased 55.0%
to $1,485,645 in 1996 on volumes of 48,157 BBLs  and 261,686 MCF in 1996 versus
$958,721 on volumes of 41,750 BBLs and 201,790 MCF in 1995.  This $526,924
increase in oil and gas sales resulted from oil and gas volumes increasing
15.3% and 29.7% respectively, and higher oil and gas prices .  Oil prices
increased 16.7% to $19.66/BBL in 1996 from $16.84/BBL in 1995.  Gas prices
increased 62.6% to $2.06/MCF in 1996 from $1.27/MCF in 1995.  Lease bonuses and
rentals were $97,595 in 1996 versus $63,906 in 1995.  Interest and other income
decreased 10.3% to $143,059 in 1996 compared to $159,454 in 1995.  The
Company's continuing plan to focus its efforts on the exploitation of the
Company's minerals as well as accelerate and enhance its acquistion efforts
reduced the investment balances available to be placed in interest-bearing
accounts.

       Total costs and expenses decreased 14.9% to $1,434,862 in the first nine
months of 1996 compared to $1,686,708 for the same period of 1995.  Lease
operating expenses increased $84,609 or 34.5% to $329,822 in 1996 compared to
$245,213 in 1995.  This increase is a result of adding the two successful
development wells on the mineral acreage and the acquisitions made in the
second half of 1995.  Reflecting the Company's plan to accelerate its
acquisition efforts and its election not to participate in certain drilling
ventures on its minerals, the Company reduced expenses for dry holes and
abandonments by $82,362 or 47.0% to $93,016 in 1996 compared to $175,378 in
1995.  Depreciation, depletion and amortization expenses decreased 9.9% to
$161,548 in 1996 from $179,280 in 1995.  Geological and geophysical expenses
decreased slightly to $176,037 in 1996 from $178,709 in 1995.  General and
administrative expenses decreased $233,689 or 25.7% to $674,439 in 1996
compared to $908,128 in 1995.  This decrease is primarily attributed to the
Company not having to defend itself against a competing slate of directors as
it did in 1995.

       The Company recognized net income of $537,630, or $0.10 per share in the
first nine months in 1996 compared to a net loss of $504,627, or $0.09 per
share for the same period in 1995.  Net income for the first nine months of
1996 includes a $526,567 gain from the sale of marketable securities compared
to none for the same period in 1995.  Net income from operations after federal
income taxes,





                                     - 10 -
<PAGE>   11




excluding the gain from the sale of marketable securities was $194,527 or $0.04
per share.





                                     - 11 -
<PAGE>   12



                          TOREADOR ROYALTY CORPORATION

                               September 30, 1996

                         PART II.     OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.

        (a)   Exhibits

              The information required by this Item 6(a) is set forth in the
Index to Exhibits accompanying this quarterly report and is incorporated herein
by reference.

        (b)   Reports on Form 8-K

              None.


                                   SIGNATURES

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


                                        TOREADOR ROYALTY CORPORATION,
                                                  Registrant


                                                /s/ PETER R. VIG
                                        -----------------------------------
                                               Peter R. Vig, Chairman;
                                        the Principal Executive, Financial
                                               and Accounting Officer


November 12, 1996


                                     - 12 -
<PAGE>   13
                          TOREADOR ROYALTY CORPORATION

                               September 30, 1996

                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
Exhibit
 Number                   Exhibit
 ------                   -------
   <S>              <C>
   27               Financial Data Schedule
</TABLE>