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                                                                    EXHIBIT 10.1



                                                                   JACK L. WOODS


                          TOREADOR ROYALTY CORPORATION

                      NON-QUALIFIED STOCK OPTION AGREEMENT

         THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this "Agreement"), made and
entered into as of May 15, 1997, by and between Toreador Royalty Corporation, a
Delaware corporation (the "Company"), and Jack L. Woods ("Optionee");

                              W I T N E S S E T H:

         WHEREAS, Optionee provides consulting services ("Services") to the
Company; and

         WHEREAS, the Company desires to extend to Optionee the opportunity to
acquire Common Stock as an added incentive for Optionee to continue providing
Services to the Company and to advance the interests of the Company; and

         WHEREAS, the Board of Directors of the Company has authorized and
approved the grant of non-qualified stock options to Optionee subject to the
terms and conditions herein provided; and

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, do hereby agree as follows:

         1.      Grant of Option and Option Period.  The Company hereby grants
to Optionee as of the date of this Agreement (the "Grant Date"), subject to the
provisions of Section 2 hereof and as hereinafter set forth, an option (the
"Option") to purchase 30,000 shares of Common Stock, par value $.15625 per
share, of the Company ("Common Stock") at the price of $2.50 per share, at any
time or (with respect to partial exercises) from time to time during a period
commencing on the date hereof and ending on May 15, 2007.

         2.      Exercise of Option.  The Option may be exercised by written
notice signed by Optionee and delivered to the Secretary of the Company or sent
by United States registered or certified mail, postage prepaid, addressed to
the Company (to the attention of its Secretary) at its corporate office in
Dallas, Texas.  Such notice shall state the number of shares as to which the
Option is exercised and shall be accompanied by the full amount of the purchase
price of such shares, in cash or by check.  Any such notice shall be deemed
given on the date on which the same was deposited in a regularly maintained
receptacle for the deposit of United States mail, addressed and sent as
above-stated, or, in the case of hand
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delivery, on the date of receipt thereof by the Secretary of the Company.  In
the event of Optionee's death, the executor or administrator of Optionee's
estate (or anyone who shall have acquired the Option by will or pursuant to the
laws of descent and distribution) may exercise the Option in accordance with
the provisions of this Agreement.

         3.      Delivery of Certificates Upon Exercise of the Option.
Delivery of a certificate or certificates representing the purchased shares of
Common Stock shall be made promptly after receipt of notice of exercise and
payment of the purchase price.  If the Company so elects, it obligation to
deliver shares of Common Stock upon the exercise of the Option shall be
conditioned upon its receipt from the person exercising the Option of an
executed investment letter, in form and content satisfactory to the Company and
its legal counsel, evidencing the investment intent of such person and such
other matters as the Company may reasonably require.  It the Company so elects,
the certificate or certificates representing the shares of Common Stock issued
upon exercise of the Option shall bear a legend in substantially the following
form:

                 THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
                 FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
                 SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS AND
                 MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SHARES
                 ARE FIRST REGISTERED THEREUNDER OR UNLESS THE COMPANY RECEIVES
                 A WRITTEN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE
                 ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT REGISTRATION
                 THEREUNDER IS NOT REQUIRED.

         4.      Adjustments Upon Changes in Common Stock.  In the event that
before delivery by the Company of all the shares in respect of which the Option
is granted, the Company shall have effected a Common Stock split or dividend
payable in Common Stock, or the outstanding Common Stock of the Company shall
have been combined into a smaller number of shares, the shares still subject to
the Option shall be increased or decreased to reflect proportionately the
increase or decrease in the number of shares outstanding, and the purchase
price per share shall be decreased or increased so that the aggregate purchase
price for all the then optioned shares shall remain the same as immediately
prior to such split, dividend or combination.  In the event of a
reclassification of Common Stock not covered by the foregoing, or in the event
of a liquidation, separation or reorganization, including a merger,
consolidation or sale of assets, the Board shall make such adjustments, if any,
as it may deem appropriate in the number, purchase price and kind of shares
still subject to the Option.  The provisions of this Section 4 shall only be
applicable if, and only to the extent that, the application thereof does not
conflict with any valid governmental statute, regulation or rule.





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         5.      Transferability.  The Option evidenced hereby is not
transferable otherwise than by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined in the Code or
in Title I of the Employee Retirement Income Security Act of 1974, as amended,
and during the lifetime of Optionee is exercisable only by Optionee.

         6.      Applicable Law.  All questions arising with respect to the
provisions of this Agreement shall be determined by application of the laws of
the State of Texas except to the extent preempted by Federal law.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.


                                        The "Company"
                                        
                                        TOREADOR ROYALTY CORPORATION
                                        
                                        
                                        
                                        By:   /s/ JOHN MARK MCLAUGHLIN
                                              ---------------------------------
                                              John Mark McLaughlin
                                              Chairman of the Board and 
                                              President
                                        

                                        "Optionee"
                                        
                                        
                                        
                                              
                                        /s/ JACK L. WOODS
                                        ---------------------------------------
                                        Jack L. Woods
                                        




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