Item 1. Business
The Company
California Petroleum Transport Corporation, ("California Petroleum"), was incorporated in Delaware in 1995. California Petroleum is a special purpose corporation that was organized solely for the purpose of issuing, as agent on behalf of the Owners (as defined below), term mortgage notes and serial mortgage notes (together the "Notes") as obligations of California Petroleum and loaning the proceeds of the sale to the Owners, by means of term loan and serial loans, to facilitate the funding of the acquisition of the four vessels (the "Vessels") described below in Item 2
Item 2. Properties
California Petroleum has no property. The serial and term loans granted to the Owners are collateralised by first preferred mortgages over the property of the Owners as outlined below. The Owners paid approximately $80.7 million for each double-hulled Vessel and $40.0 million for the single-hulled Vessel in 1995. Other than the Vessels described below, the Owners have no property.
Approximate Vessel Construction Registration Delivery Date dwt. - ------ ------------ ------------ ------------- ----------- Cygnus Voyager(1) Double-hull Bahamas March 1993 150,000 Altair Voyager(2) Double-hull Bahamas August 1993 130,000 Sirius Voyager(3) Double-hull Bahamas October 1994 150,000 Virgo Voyager(4) Single-hull Bahamas February 1992 150,000
- ---------- (1) ex Samuel Ginn (2) ex Condoleeza Rice (3) ex Chevron Mariner (4) ex William E. Crain
Item 3.
Item 3. Legal Proceedings
We are not a party to any material pending legal proceedings other than ordinary routine litigation incidental to our business, to which we are a party or of which our property is the subject. In the future, we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. Those claims, even if lacking merit, could result in the expenditure by us of significant financial and managerial resources.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended December 31, 2004.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) There is no established trading market for the Common Stock of the Registrant.
(b) Asof March 31, 2005, with respect to the Common Stock, there was one (1) holder of record of the Registrant's Common Stock.
Item 6.
Item 6. Selected Financial Data
The selected statement of operations and retained earnings data of the Company with respect to the fiscal years ended December 31, 2004, 2003 and 2002, and the balance sheet data as at December 31, 2004 and 2003 have been derived from the Company's audited financial statements included herein and should be read in conjunction with such statements and the notes thereto. The selected statement of operations and retained earnings data with respect to the fiscal years ended December 31, 2001 and 2000 and the selected balance sheet data as at December 31, 2002, 2001 and 2000 have been derived from audited financial statements of the Company not included herein.
The following table sets forth a summary of quarterly unaudited results of operations for the years ended December 31, 2004 and 2003.
($'000s) First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- Net operating revenues 2,948 2,683 2,642 2,649 Expenses 2,948 2,683 2,642 2,649 Net income - - - - Net operating revenues 3,246 3,116 3,051 3,037 Expenses 3,246 3,116 3,051 3,037 Net income - - - -
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Business Strategy
California Petroleum
California Petroleum was organised to issue, as agent on behalf of the Owners, the Notes and subsequently loan the proceeds of the sale to the Owners. California Petroleum's only sources of funds with respect to the Notes are receipts of principal and interest on the related loans receivable from each Owner. General and administrative expenses comprising trustee fees, legal fees, agency fees and other costs incurred by California Petroleum are billed to the Owners. The net result for the year is neither a gain nor a loss, the detail relating to such result is set forth in the Statement of Operations and Retained Earnings included herein.
The Owners
The Owners' strategy has been to acquire the Vessels and charter them to Chevron under bareboat charters which are expected to provide
a) charter-hire payments which California Petroleum and the Owners expect will be sufficient to pay, so long as the Charters are in effect: i. the Owners' obligations under the loans for acquiring the Vessels, ii. management fees and technical advisor's fees, iii. recurring fees and taxes, and iv. any other costs and expenses incidental to the ownership and chartering of the Vessels that are to be paid by the Owners;
b) termination payments sufficient to make sinking fund and interest payments on the term mortgage notes, to the extent allocable to the Vessel for which the related Charter has been terminated, for at least two years following any such termination, during which time the Vessel may be sold or rechartered; and
c) that the Vessels will be maintained in accordance with the good commercial maintenance practices required by the Charters; and to arrange for vessel management and remarketing services to be available in case any Charter is terminated by Chevron or any Vessel is for any other reason returned to the possession and use of the Owners.
On March 28, 2005, CalPetro Bahamas III received non-binding notice of Chevron's intention to exercise its first termination option on the single hull vessel Virgo Voyager.As of March 31, 2005, notice had not been received from Chevron regarding the termination of the remaining three Charters.
Liquidity and Capital Resources
California Petroleum is a passive entity, and its activities are limited to collecting cash from the Owners and making repayments on the Notes. California Petroleum has no source of liquidity and no capital resources other than the cash receipts attributable to the serial and term loans.
Critical Accounting Policies
California Petroleum's principal accounting policies are described in Note 2 to the financial statements included in Item 8 of this Form 10-K. The most critical accounting policies include:
o Accounting for deferred charges
Recently Issued Accounting Standards
In December 2003, the Financial Accounting Standards Board issued Interpretation No. 46R, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 ("the Interpretation"), which replaces Interpretation No. 46, issued in January 2003. The Interpretation addresses the consolidation of business enterprises (variable interest entities) to which the usual condition (ownership of a majority voting interest) of consolidation does not apply. This Interpretation focuses on financial interests that indicate control. It concludes that in the absence of clear control through voting interests, a company's exposure (variable interest) to the economic risks and potential rewards from the variable interest entity's assets and activities are the best evidence of control. Variable interests are rights and obligations that convey economic gains or losses from changes in the value of the variable interest entity's assets and liabilities. Variable interests may arise from financial instruments, service contracts, and other arrangements. If an enterprise holds a majority of the variable interests of an entity, it would be considered the primary beneficiary. The primary beneficiary would be required to include assets, liabilities, and the results of operations of the variable interest entity in its financial statements.
Adoption of this standard has not had a material effect on the results of California Petroleum.
Tabular disclosure of contractual obligations
As at December 31, 2004, California Petroleum had the following contractual obligations and commitments:
Payments due by period
Less than 1-3 3-5 More than (in $'000) 1 year years years 5 years Total - ---------- ------ ----- ----- ------- ----- Serial Mortgage Notes (7.60 to 7.62%) 7,740 2,530 - - 10,270 Term Mortgage Notes (8.52%) 6,542 20,468 21,884 65,651 114,545 ------- ------- ------- ------- -------- Total contractual obligations 14,282 22,998 21,884 65,651 124,815
Item 7a.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
None of the instruments issued by California Petroleum are for trading purposes. California Petroleum is exposed to business risk inherent in the international tanker market as outlined in Risk Factors.
Quantitative information about the instruments as at December 31, 2004 is as follows:
Serial Loans
The principal balances of the serial loans made to the Owners earn interest at rates ranging from 7.60% to 7.62% and mature over a remaining two-year period beginning April 1, 2005. The loans are reported net of the related discounts, which are amortized over the term of the loans.
The outstanding serial loans have the following characteristics:
Maturity date Interest rate Principal due ($ 000's) April 1, 2005 7.60% 7,740 April 1, 2006 7.62% 2,530 -------- -------- 10,270 =========
The outstanding amount of serial loans as at December 31, 2004 was $10,270,000.
Term Loans
The principal balances of the term loans made to the Owners earn interest at a rate of 8.52% per annum and are to be repaid over a remaining eleven-year period beginning April 1, 2005. The loans are reported net of the related discounts, which are amortized over the term of the loans.
The table below provides the final principal payments on the term loans if none of the Charters is terminated and if all of the Charters are terminated on the earliest termination dates.
No initial All initial charters charters Scheduled payment date terminated terminated $'000 $'000
April 1, 2005 6,542 6,542 April 1, 2006 9,526 6,517 April 1, 2007 10,942 5,880 April 1, 2008 10,942 6,380 April 1, 2009 10,942 6,930 April 1, 2010 10,942 7,510 April 1, 2011 10,942 8,160 April 1, 2012 10,942 8,840 April 1, 2013 10,942 9,600 April 1, 2014 10,942 10,420 April 1, 2015 10,941 37,766 ------- ------- 114,545 114,545 ======= =======
The outstanding amount of term loans at December 31, 2004 was $114,545,000.
Serial Mortgage Notes
The serial mortgage notes bear interest at rates ranging from 7.60% to 7.62% through maturity. The Notes mature over a remaining two-year period beginning April 1, 2005. Interest is payable semi-annually.
The outstanding serial notes have the following characteristics:
Maturity date Interest rate Principal due ($ 000's) April 1, 2005 7.60% 7,740 April 1, 2006 7.62% 2,530 ------- 10,270 =======
Term Mortgage Notes
The term mortgage notes bear interest at a rate of 8.52% per annum. The principal is repayable on the term mortgage notes in accordance with a remaining eleven-year sinking fund schedule beginning April 1, 2005. Interest is payable semi-annually.
The table below provides the scheduled sinking fund redemption amounts and final principal payments on the term mortgage notes if none of the Initial Charters are terminated and if all of the Initial Charters are terminated on the earliest termination dates.
No initial All initial charters charters terminated terminated $'000 $'000
April 1, 2005 6,542 6,542 April 1, 2006 9,526 6,517 April 1, 2007 10,942 5,880 April 1, 2008 10,942 6,380 April 1, 2009 10,942 6,930 April 1, 2010 10,942 7,510 April 1, 2011 10,942 8,160 April 1, 2012 10,942 8,840 April 1, 2013 10,942 9,600 April 1, 2014 10,942 10,420 April 1, 2015 10,941 37,766 ------- ------- 114,545 114,545 ======= =======
Item 8.
Item 8. Financial Statements and Supplementary Data Page
Report of Registered Public Accounting Firm 14 Report of Independent Registered Public Accounting Firm 15 Balance Sheets as of December 31, 2004 and 2003 16 Statements of Operations and Retained Earnings for the Years Ended December 31, 2004, 2003 and 2002 17 Statements of Cash Flows for the Years Ended December 31, 2004, 18 2003 and 2002 Notes to Financial Statements 19
Report of Registered Public Accounting Firm
To the Board of Directors California Petroleum Transport Corporation
We have audited the accompanying balance sheet of California Petroleum Transport Corporation, as of December 31, 2004 and the related statement of operations and retained earnings, and cash flows for the year ended December 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of California Petroleum Transport Corporation at December 31, 2004, and the results of its operations and its cash flows for the year ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America.
Grant Thornton LLP
New York, New York February 16, 2005 (except for Note 11, as to which the date is March 28, 2005)
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholder California Petroleum Transport Corporation
We have audited the accompanying balance sheets of California Petroleum Transport Corporation as of December 31, 2003, and the related statements of operations and retained earnings, and cash flows for each of the two years in the period ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of California Petroleum Transport Corporation at December 31, 2003, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.
Ernst & Young Chartered Accountants
Douglas, Isle of Man April 13, 2004
California Petroleum Transport Corporation Balance Sheets as of December 31, 2004 and 2003
(in thousands of US$) Note 2004 2003 ASSETS Current assets: Cash and cash equivalents 1 1 Current portion of serial loans receivable 4 7,740 12,950 Current portion of term loans receivable 5 6,542 3,355 Interest receivable 2,635 2,944 Other current assets 32 25 - -------------------------------------------------------------------------------- Total current assets 16,950 19,275 Serial loans receivable, less current portion 4 2,528 10,100 Term loans receivable, less current portion 5 107,097 113,551 Deferred charges and other long-term assets 7 908 1,164 - -------------------------------------------------------------------------------- Total assets 127,483 144,090 ================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accrued interest 2,635 2,944 Current portion of serial mortgage notes 8 7,740 12,950 Current portion of term mortgage notes 8 6,542 3,355 Other current liabilities 32 25 - -------------------------------------------------------------------------------- Total current liabilities 16,949 19,274 Serial mortgage notes, less current portion 8 2,530 10,270 Term mortgage notes, less current portion 8 108,003 114,545 - -------------------------------------------------------------------------------- Total liabilities 127,482 144,089 Stockholder's equity Common stock, $1 par value; 1,000 shares authorised, issued and outstanding 1 1 - -------------------------------------------------------------------------------- Total liabilities and stockholder's equity 127,483 144,090 ================================================================================
See accompanying Notes to the Financial Statements
California Petroleum Transport Corporation Statements of Operations and Retained Earnings for the years ended December 31, 2004, 2003 and 2002 (in thousands of US$)
2004 2003 2002 Revenue Interest income 10,865 12,369 13,772 Expenses reimbursed 57 81 36 - -------------------------------------------------------------------------------- Total operating revenues 10,922 12,450 13,808 - --------------------------------------------------------------------------------
Expenses General and administrative expenses (57) (81) (36) Amortisation of debt issue costs (256) (256) (256) Interest expense (10,609) (12,113) (13,516) - -------------------------------------------------------------------------------- (10,922) (12,450) (13,808) - --------------------------------------------------------------------------------
Net income - - -
Retained earnings, beginning of period - - - - -------------------------------------------------------------------------------- Retained earnings, end of period - - - ================================================================================
See accompanying Notes to the Financial Statements
California Petroleum Transport Corporation Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002 (in thousands of US$)
2004 2003 2002 Cash flows from operating activities Net income - - - Adjustments to reconcile net income to net cash provided by operating activities: Amortisation of deferred debt issue costs 256 256 256 Changes in operating assets and liabilities: Decrease in interest receivable 309 378 342 Decrease (increase) on other current assets (7) (10) (5) Decrease in accrued interest (309) (378) (342) (Decrease) increase in other current liabilities 7 10 5 - -------------------------------------------------------------------------------- Net cash provided by operating activities 256 256 256 - -------------------------------------------------------------------------------- Cash flows from investing activities Collections on loans receivable 16,049 17,904 17,904 - -------------------------------------------------------------------------------- Net cash provided by investing activities 16,049 17,904 17,904 - -------------------------------------------------------------------------------- Cash flows from financing activities Repayments of mortgage notes (16,305) (18,160) (18,160) - -------------------------------------------------------------------------------- Net cash used in financing activities (16,305) (18,160) (18,160) - -------------------------------------------------------------------------------- Net change in cash and cash equivalents - -
Cash and cash equivalents at beginning of period 1 1 1 - -------------------------------------------------------------------------------- Cash and cash equivalents at end of period 1 1 1 ================================================================================
Supplemental disclosure of cash flow information: Interest paid 11,173 12,492 13,858 ================================================================================
See accompanying Notes to Financial Statements
California Petroleum Transport Corporation Notes to Financial Statements
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
California Petroleum Transport Corporation (the "Company"), which is incorporated in Delaware, is a special purpose corporation that has been organized solely for the purpose of issuing, as agent on behalf of CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III) Limited and CalPetro Tankers (IOM) Limited (each an "Owner" and, together the "Owners"), serial mortgage notes and the term mortgage notes (together, "the Notes") as full recourse obligations of the Company and loaning the proceeds of the sale of the Notes to the Owners by means of serial loans ("Serial Loans") and term loans ("Term Loans"), to facilitate the funding of the acquisition of four vessels (the "Vessels") from Chevron Transport Corporation (the "Chevron").
The Owners have chartered the Vessels to Chevron under bareboat charters that are expected to provide sufficient payments to cover the Owners' obligations under the loans from the Company. Chevron can terminate a charter at specified dates prior to the expiration of the charter, provided it give the Owner non-binding notice of its intention at least 12 months prior to such termination and make a termination payment. The Owners' only sources of funds with respect to its obligation to the Company are the payments by Chevron, including termination payments. The Owners do not have any other source of capital for payment of the loans.
The Company's only source of funds with respect to the Notes is the payment of the principal and interest on the loans by the Owners. The Company does not have any other source of capital for payment of the Notes.
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). These statements reflect the net proceeds from the sale of the Term Mortgage Notes together with the net proceeds from sale of the Serial Mortgage Notes having been applied by way of long-term loans to the Owners to fund the acquisition of the Vessels from Chevron.
2. PRINCIPAL ACCOUNTING POLICIES
(a) Revenue and expense recognition
Interest receivable on the Serial Loans and on the Term Loans is accrued on a daily basis. Interest payable on the Serial Mortgage Notes and on the Term Mortgage Notes is accrued on a daily basis. The Owners reimburse the Company for general and administrative expenses incurred on their behalf.
(b) Deferred charges
Deferred charges represent the capitalization of debt issue costs. These costs are amortized over the term of the Notes to which they relate.
(c) Reporting currency
The reporting and functional currency is the United States dollar.
(d) Cash and cash equivalents
For the purpose of the statement of cash flows, all demand and time deposits and highly liquid, low risk investments with original maturities of three months or less are considered equivalent to cash.
(e) Use of estimates
The preparation of financial statements in accordance with US GAAP requires the Company to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities on the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
3. RECENTLY ISSUED ACCOUNTING STANDARDS
In December 2003, the Financial Accounting Standards Board issued Interpretation No. 46R, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51("the Interpretation"), which replaces Interpretation No. 46, issued in January 2003. The Interpretation addresses the consolidation of business enterprises (variable interest entities) to which the usual condition (ownership of a majority voting interest) of consolidation does not apply. This Interpretation focuses on financial interests that indicate control. It concludes that in the absence of clear control through voting interests, a company's exposure (variable interest) to the economic risks and potential rewards from the variable interest entity's assets and activities are the best evidence of control. Variable interests are rights and obligations that convey economic gains or losses from changes in the value of the variable interest entity's assets and liabilities. Variable interests may arise from financial instruments, service contracts, and other arrangements. If an enterprise holds a majority of the variable interests of an entity, it would be considered the primary beneficiary. The primary beneficiary would be required to include assets, liabilities, and the results of operations of the variable interest entity in its financial statements.
Adoption of this standard has not had a material effect on the results of the Company.
4. SERIAL LOANS
The principal balances of the Serial Loans earn interest at rates ranging from 7.60% to 7.62% and mature over a remaining two-year period beginning April 1, 2005. The loans are reported net of the related discounts, which are amortised over the term of the loans.
5. TERM LOANS
The principal balances of the Term Loans earn interest at a rate of 8.52% per annum and are to be repaid over a remaining eleven-year period beginning April 1, 2005. The loans are reported net of the related discounts, which are amortised over the term of the loans.
6. SERIAL LOANS AND TERM LOANS COLLATERAL
The Serial and Term Loans are collateralised by first preferred mortgages on the Vessels to the Company. The earnings and insurance relating to the Vessels have been collaterally assigned pursuant to an assignment of earnings and insurance to the Company, which in turn has assigned such assignment of earnings and insurance to JP Morgan Chase (formerly Chemical Trust Company of California) as the collateral trustee. The Charters and Chevron Guarantees (where the obligations of Chevron are guaranteed by ChevronTexaco Corporation) relating to the Vessels have been collaterally assigned pursuant to the assignment of initial charter and assignment of initial charter guarantee to the Company, which in turn has assigned such assignments to the collateral trustee. The Capital stock of each of the Owners has been pledged to the Company pursuant to stock pledge agreements.
7. DEFERRED CHARGES
Deferred charges represent the capitalization of debt issue costs. These costs are amortized over the term of the Notes to which they relate. The deferred charges are comprised of the following amounts:
(in thousands of $) 2004 2003
Debt arrangement fees 3,400 3,400 Accumulated amortisation (2,492) (2,236) - ------------------------------------------------------------------------------ 908 1,164 ]=============================================================================
8. DEBT
(in thousands of $) 2004
Serial Mortgage Notes (7.60% to 7.62%) maturing 10,270 through 2006 8.52% Term Mortgage Notes due 2015 114,545 - -------------------------------------------------------------------------------- Total debt 124,815 Less: short-term portion (14,282) - -------------------------------------------------------------------------------- 110,533 ================================================================================
The outstanding debt as of December 31, 2004 is repayable as follows:
(in thousands of $) Year ending December 31, 2005 14,282 2006 12,056 2007 10,942 2008 10,942 2009 10,942 2010 and later 65,651 - -------------------------------------------------------------------------------- Total debt 124,815 ================================================================================
The serial mortgage notes bear interest at rates ranging from 7.60% to 7.62% through maturity. The serial mortgage notes mature over a remaining two-year period beginning April 1, 2005. Interest is payable semi-annually. The serial mortgage notes include certain covenants such as restriction on the payment of dividends and making additional loans or advances to affiliates. At December 31, 2004 and 2003, the Company was in compliance with these covenants.
The term mortgage notes bear interest at a rate of 8.52% per annum. Principal is repayable on the term mortgage notes in accordance with a remaining eleven-year sinking fund schedule beginning April 1, 2005. Interest is payable semi-annually. The term mortgage notes include certain covenants such as restriction on the payment of dividends and making additional loans or advances to affiliates. At December 31, 2004 and 2003, the Company was in compliance with these covenants.
As of December 31, 2004, the effective interest rate for the Notes of the Company was 8.44%.
The term mortgage notes are subject to redemption through operation of the mandatory sinking fund on April 1 of each year, commencing on April 1, 2004, to and including April 1, 2014, according to the applicable schedule of sinking fund payments set forth herein. The sinking fund redemption price is 100% of the principal amount of term mortgage notes being redeemed, together with interest accrued to the date fixed for redemption. If a Charter is terminated, the scheduled mandatory sinking fund payments on the term mortgage notes will be revised so that the allocated principal amount of the term mortgage notes for the related Vessel will be redeemed on the remaining sinking fund redemption dates on a schedule that approximates level debt service with an additional principal payment on the maturity date of $7,000,000, for any of the double-hulled Vessels, or $5,500,000 for the single hulled Vessel.
The table below provides the revised scheduled sinking fund redemption amounts and final principal payments on the term mortgage notes following termination of the related charters on each of the optional termination dates.
9. SHARE CAPITAL
2004 2003 Authorised and issued share capital: 1,000 shares of $1.00 each 1,000 1,000 Fully paid share capital: NIL - -
10. FINANCIAL INSTRUMENTS
Fair values
The carrying value and estimated fair value of the Company's financial instruments at December 31, 2004 and 2003 are as follows:
The methods and assumptions used in estimating the fair values of financial instruments are as follows:
The carrying value of cash and cash equivalents, which are highly liquid, is a reasonable estimate of fair value.
The estimated fair value of the mortgage notes is based on the quoted market price of these or similar notes when available
Concentrations of risk The Company's only source of funds for the repayment of the principal and interest on the Notes are the repayments from the Owners. The Owners only source of funds for the repayment of the principal and interest on the loans from the Company are from charterhire payments from Chevron, investment income and the proceeds, if any, from the sale of any of the Vessels. Accordingly, the Company's ability to service its obligations on the Notes is wholly dependent upon the financial condition, results of operations and cash flows from the Owners.
11. SUBSEQUENT EVENTS
On March 28, 2005, CalPetro Bahamas III received non-binding notice of Chevron's intention to exercise its first termination option on the single hull vessel Virgo Voyager.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
On January 26, 2005, the Directors of the Company determined to engage Grant Thornton LLP, New York, New York as the Company's Certifying Accountant effective for the year ended December 31, 2004. Grant Thornton replaced Ernst & Young who declined to stand for re-election. The change reflects the decision by Independent Tankers Corporation to prepare consolidated group accounts with Grant Thornton as the group's certifying accountant. The Company was set up as to act as an agent to issue certain notes on behalf of four subsidiaries of Independent Tankers Corporation.
The reports of Ernst & Young on the Company's financial statements for the years ended December 31, 2003 and 2002 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with the audits of the Company's financial statements for the years ended December 31, 2003 and 2002 and in the subsequent interim period, there were no disagreements with Ernst & Young on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to the satisfaction of Ernst & Young would have caused Ernst & Young to make reference to the matter in their report.
Item 9a.
Item 9a. Controls and Procedures
The Company's management, with the participation of the Company's manager Frontline Ltd, including the Company's President and Treasurer, has evaluated the effectiveness of the Company's disclosure controls and procedures as of December 31, 2004. Based on that evaluation, the Company's President and Treasurer concluded that the Company's disclosure controls and procedures were effective as of December 31, 2004.
Changes in Internal Controls
There were no material changes in the Company's internal control over financial reporting during the fourth quarter of 2004.
Item 9b.
Item 9b. Other Information
Not Applicable
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The Company does not have any employees. The following table sets forth the name, age and principal position with the Company of each of its directors and executive officers.
Name Age Position with the Company
Nancy I. DePasquale 37 Director and President Geraldine St-Louis 29 Vice President Louise E. Colby 56 Director and Assistant Secretary R. Douglas Donaldson 63 Treasurer Blake W. Grosch 24 Secretary
Officers are appointed by the Board of Directors and will serve until they resign or are removed by the Board of Directors.
Nancy I. DePasquale has been a Director and the President of California Petroleum since 1994. She joined JH Management Corporation, a Massachusetts business corporation that engages in the management of special purpose corporations for structured financial transactions in 1993 as its President and is currently the Vice President of JH Management Corporation. From 1991 to 1992, she was a legal secretary at Ropes & Gray, a law firm in Boston, MA. From 1992 to 1993, she was a personal assistant to Bob Woolf Associates, Inc.
Geraldine St-Louis has been the Vice President of the Company since March 2001. She joined JH Management Corporation in March 2001 as the vice president. From 1999 to 2001, she was an Executive Secretary in the Health Systems Group at Harvard University School of Public Health, specialising in the field of health studies in Third World countries.
Louise E. Colby has been a Director of the Company since 1994. She was the Secretary and Treasurer in 1994 and has served as an Assistant Secretary from 1995 to present. She is a former Director, Secretary and Treasurer of JH Management Corporation beginning in 1989 and currently serves as its Assistant Treasurer. She has also served as the Trustee of the Cazenove Street Realty Trust since 1983 and, since 1985, a Trustee of the 1960 Trust, a charitable trust for the benefit of Harvard University.
R. Douglas Donaldson has been the Treasurer of the Company since 1995. He has been President of JH Management Corporation since 1994. He was the Vice President of a sibling management corporation, JH Holdings Corporation, from 1994 to early 1999, when he was promoted to President of that corporation as well. Prior to 1994, he was a bank officer (primarily at Bank of New England) for over twenty-five years in the field of personal trust and estate planning. He is also the sole trustee of two charitable trusts for the benefit of Harvard University.
Blake W. Grosch has been the Secretary of the Company since June 2004.He is currently a corporate paralegal at the law offices of Ropes & Gray in Boston. From January 2003 to June 2004, he worked as a real estate paralegal for Sheldon M. Drucker, Esq., in Boston.
The Company's equity is neither listed nor publicly traded. The equity is held by one beneficial holder, The California Trust. The Owners obligations toward their bondholders are set out in detail in covenants contained in the Indenture for their Notes. For the above stated reasons, the Company has not adopted a business code of ethics or appointed a financial expert.
Item 11.
Item 11. Executive Compensation
None of the directors or executive officers of the Company receive any compensation in connection with their respective positions. The Company has not entered into any affiliate transactions, other than the original agency agreement for the issuance of the notes.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table provides information as of March 31, 2005 with respect to the ownership by each person or group of persons, known by the registrant to be a beneficial owner of 5% or more of the Common Stock.
Except as set forth below, the Registrant is not aware of any beneficial owner of more than 5% of the Common Stock as of close of business on March 31, 2005.
Beneficial Ownership
Name and Class of address of Number Percent Shares Beneficial Owners of Shares of Class ------ ----------------- --------- --------
Ordinary Shares The California Trust 1,000 100% C/o JH Holdings Corporation Room 3218, One International Place Boston MA 02110-2624
The Company does not have an equity compensation plan.
Item 13.
Item 13. Certain Relationships and Related Transactions
Not applicable.
Item 14.
Item 14. Principal Accountant Fees and Services
We have engaged Grant Thornton as our principal accountant. The following table summarizes fees we have paid Grant Thornton for independent auditing, tax and related services for each of the last two fiscal years:
2004 2003 Audit fees (1) 15,000 nil Audit-related fees (2) n/a n/a Tax fees (3) n/a n/a All other fees (4) n/a n/a
(1) Audit fees represent amounts billed for each of the years presented for professional services rendered in connection with (i) the audit of our annual financial statements, (ii) the review of our quarterly financial statements or (iii) those services normally provided in connection with statutory and regulatory filings or engagements including comfort letters, consents and other services related to SEC matters. This information is presented as of the latest practicable date for this annual report on Form 10-K.
(2) Audit-related fees represent amounts we were billed in each of the years presented for assurance and related services that are reasonably related to the performance of the annual audit or quarterly reviews. This category primarily includes services relating to internal control assessments and accounting-related consulting. Grant Thornton rendered no such services during the last two years.
(3) Tax fees represent amounts we were billed in each of the years presented for professional services rendered in connection with tax compliance, tax advice and tax planning. Grant Thornton rendered no such services during the last two years.
(4) All other fees represent amounts we were billed in each of the years presented for services not classifiable under the other categories listed in the table above. Grant Thornton rendered no such services during the last two years.
The Company's Board of Directors has assigned responsibility for the engagement of the auditors to the Company's manager.
PART IV
Item 15.
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this Annual Report under Item 8. Financial Statements and Supplementary Data:
Financial Statements
Report of Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Balance Sheets at December 31, 2004 and 2003
Statements of Operations and Retained Earnings for the Years Ended December 31, 2004, 2003 and 2002
Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002
Notes to Financial Statements
(b) Exhibits
3.1 Certificate of Incorporation of California Petroleum Transport Corporation (filed as Exhibit 3.1 to Registrant's Registration Statement on Form S-1, Commission File Number 33-79220, and incorporated herein by reference)*
3.2 Bylaws of California Petroleum Transport Corporation (filed as Exhibit 3.2 to Registrant's Registration Statement on Form S-1, Commission File Number 33-79220, and incorporated herein by reference)*
3.3 Certificate of Incorporation and Memorandum of Association of CalPetro Tankers (Bahamas I) Limited (filed as Exhibit 3.3 to Registrant's Registration Statement on Form, Commission File Number 33-79220, and incorporated herein by reference)*
3.4 Articles of Association of CalPetro Tankers (Bahamas I) Limited (filed as Exhibit 3.4 to Registrant's Registration Statement on Form, Commission File Number 33-79220, and incorporated herein by reference)*
3.5 Certificate of Incorporation and Memorandum of Association of CalPetro Tankers (Bahamas II) Limited (filed as Exhibit 3.5 to Registrant's Registration Statement on Form, Commission File Number 33-79220, and incorporated herein by reference)*
3.6 Articles of Association of CalPetro Tankers (Bahamas II) Limited (filed as Exhibit 3.6 to Registrant's Registration Statement on Form , Commission File Number 33-79220, and incorporated herein by reference).
3.7 Certificate of Incorporation of CalPetro Tankers (IOM) Limited (filed as Exhibit 3.7 to Registrant's Registration Statement on Form, Commission File Number 33-79220, and incorporated herein by reference).
3.8 Memorandum and Articles of Association of CalPetro Tankers (IOM) Limited (filed as Exhibit 3.8 to Registrant's Registration Statement on Form, Commission File Number 33-79220, and incorporated herein by reference).
3.9 Certificate of Incorporation and Memorandum of Association of CalPetro Tankers (Bahamas III) Limited (filed as Exhibit 3.9 to Registrant's Registration Statement on Form, Commission File Number 33-79220, and incorporated herein by reference).
3.10 Articles of Association of CalPetro Tankers (Bahamas III) Limited (filed as Exhibit 3.10 to Registrant's Registration Statement on Form , Commission File Number 33-79220, and incorporated herein by reference).
4.1 Form of Serial Indenture between California Petroleum Transport Company and Chemical Trust Company of California, as Indenture Trustee (filed as Exhibit 4.1 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference)
10.1 Form of Vessel Purchase Agreement between CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited, ,CalPetro Tankers (IOM) Limited, CalPetro Tankers (Bahamas III) Limited, and Chevron Transport Corporation (including the form of Assignment of such Vessel Purchase Agreement to California Petroleum Transport Corporation by CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (IOM) Limited, CalPetro Tankers (Bahamas III) Limited) (filed as Exhibit 10.3 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference)
10.2 Form of Bareboat Charter between CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (IOM) Limited, CalPetro Tankers (Bahamas III) Limited and Chevron Transport Corporation (filed as Exhibit 10.2 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
10.3 Form of Assignment of Initial Charter Guarantee by CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (IOM) Limited, CalPetro Tankers (Bahamas III) Limited to California Petroleum Transport Corporation (including the form of Collateral Assignment of such Initial Charter Guarantee to Chemical Trust Company of California, as Collateral Trustee by California Petroleum Transport Corporation) (filed as Exhibit 4.08 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
10.4 Form of Assignment of Earnings and Insurances from CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (IOM) Limited, CalPetro Tankers (Bahamas III) Limited to California Petroleum Transport Corporation (filed as Exhibit 4.09 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
10.5 Form of Assignment of Initial Charter from CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (IOM) Limited, CalPetro Tankers (Bahamas III) Limited to California Petroleum Transport Corporation (including the form of Collateral Assignment of such Initial Charter to Chemical Trust Company of California, as Collateral Trustee by California Petroleum Transport Corporation) (filed as Exhibit 4.10 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
10.6 Form of Management Agreement between P.D. Gram & Co., and [CalPetro Tankers (Bahamas I) Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers (IOM) Limited] [CalPetro Tankers (Bahamas III) Limited] (filed as Exhibit 4.10 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
10.7 Form of Assignment of Management Agreement from [CalPetro Tankers (Bahamas I) Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers (IOM) Limited] [CalPetro Tankers (Bahamas III) Limited] to California Petroleum Transport Corporation (filed as Exhibit 4.11 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
10.87 Form of Serial Loan Agreement between California Petroleum Transport Corporation and [CalPetro Tankers (Bahamas I) Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers (IOM) Limited] [CalPetro (Bahamas III) Limited] (filed as Exhibit 4.12 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
10.9 Form of Term Loan Agreement between California Petroleum Transport Corporation and [CalPetro Tankers (Bahamas I) Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers (IOM) Limited] [CalPetro (Bahamas III) Limited] (filed as Exhibit 4.13 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
10.10 Form of Collateral Agreement between California Petroleum Transport Corporation, the Indenture Trustee under the Serial Indenture, the Indenture Trustee under the Term Indenture and Chemical Trust Company of California, as Collateral Trustee (filed as Exhibit 4.14 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
10.11 Form of Issue of One Debenture From [CalPetro Tankers (Bahamas I) Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers (IOM) Limited] [CalPetro Tankers (Bahamas III) Limited] to California Petroleum Transport Corporation (filed as Exhibit 4.15 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
10.12 Form of First Preferred Ship Mortgage by [CalPetro Tankers (Bahamas III) Limited] [CalPetro Tankers (IOM) Limited] to California Petroleum Transport Corporation (including the form of assignment of such Mortgage to Chemical Trust Company of California, as Collateral Trustee by California Petroleum Transport Corporation) (filed as Exhibit 4.3 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
10.13 Form of Bahamian Statutory Ship Mortgage and Deed of Covenants by [CalPetro Tankers (Bahamas I) Limited] [CalPetro Tankers (Bahamas II) Limited] to California Petroleum Transport Corporation (including the form of assignment of such Mortgage to Chemical Trust Company of California, as Collateral Trustee by California Petroleum Transport Corporation) (filed as Exhibit 4.4 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
10.14 Form of Bermudian Statutory Ship Mortgage and Deed of Covenants by CalPetro Tankers (IOM) Limited to California Petroleum Transport Corporation (including the form of assignment of such Mortgage to Chemical Trust Company of California, as Collateral Trustee by California Petroleum Transport Corporation) (filed as Exhibit 4.5 to Registrant's Registration Statement on Form S-3, Commission File Number 33-56377, and incorporated herein by reference).
31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended
31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended
32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
32.1 Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
California Petroleum Transport Corporation ------------------------------------------ (Registrant)
Date April 6, 2005 By /s/ Nancy I. DePasquale ------------- ----------------------- Nancy I. DePasquale President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date April 6, 2005 By /s/ Nancy I. DePasquale ------------- ----------------------- Nancy I. DePasquale Director and President
Date April 6, 2005 By /s/ R. Douglas Donaldson ------------- ------------------------ R. Douglas Donaldson Treasurer
02089.0006 #560659