UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-79220
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California Petroleum Transport Corporation
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(Exact name of Registrant as specified in its charter)
Delaware 04-3232976
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(State or other jurisdiction (I.R.S.Employer Identification No.)
of incorporation or organization)
Suite 4350, One International Place, Boston, Massachusetts, 02101-2624
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(Address of principal executive offices)
(617) 951-7690
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(Registrant's telephone number, including area code)
Title of each class Name of each exchange
on which registered
None Not applicable
----------------------- --------------------------------
Securities registered or to be registered pursuant to section 12(g) of the Act.
None
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[X]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. None
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. 1,000 shares of Common Stock,
$1 par value
DOCUMENTS INCORPORATED BY REFERENCE: None
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
FORM 10-K
TABLE OF CONTENTS
Page
PART I
Item 1. Business ............................................ 1
Item 2. Properties........................................... 3
Item 3. Legal Proceedings.................................... 3
Item 4. Submission of Matters to a Vote
of Security Holders..................................
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters..................... 3
Item 6. Selected Financial Data............................. 3
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 4
Item 7(a) Quantitative and Qualitative Disclosures about
Market Risk......................................... 5
Item 8. Financial Statements and Supplementary Data......... 8
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...............15
PART III
Item 10. Directors and Executive Officers
of the Registrant....................................15
Item 11. Executive Compensation...............................16
Item 12. Security Ownership of Certain Beneficial
Owners and Management................................16
Item 13. Certain Relationships and Related Transactions.......17
Item 14. Controls and Procedures..............................17
PART IV
Item 15. Exhibits, Financial Statement Schedules
and Reports on Form 8-K..............................17
PART I
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 (see below), the Term Mortgage Notes and Serial Mortgage
Notes (together the "Notes") as obligations of California Petroleum and loaning
the proceeds of the sale of the Notes to the Owners to facilitate the funding of
the acquisition of the four vessels (the "Vessels") described below from Chevron
Transport Corporation (the "Initial Charterer"). All the shares of California
Petroleum are held by The California Trust, a Massachusetts charitable lead
trust formed by JH Holdings, a Massachusetts corporation, for the benefit of
certain charitable institutions in Massachusetts.
Information about revenues, profits and total assets is provided in the
financial statements included in this report.
California Petroleum has no employees.
The Owners
Each of CalPetro Tankers (Bahamas I) Limited ("CalPetro Bahamas I"), CalPetro
Tankers (Bahamas II) Limited ("CalPetro Bahamas II") and CalPetro Tankers
(Bahamas III) Limited ("CalPetro Bahamas III"), was organized as a special
purpose company under the laws of the Bahamas for the purpose of acquiring and
chartering one of the Vessels. Similarly, CalPetro Tankers (IOM) Limited
("CalPetro IOM") has been organized as a special purpose company under the laws
of the Isle of Man for the purpose of acquiring and chartering one of the
Vessels. Each of the foregoing companies also is referred to in this document as
an "Owner". Each Owner, either pursuant to the terms of its Memorandum of
Association and/or pursuant to the terms of the related Mortgage, will engage in
no business other than the ownership and chartering of its Vessel and activities
resulting from or incidental to such ownership and chartering. Each Owner is
wholly-owned by California Tankers Investments Limited, a company organized
under the laws of the Bahamas, which is a wholly-owned subsidiary of CalPetro
Holdings Limited, an Isle of Man company. None of the Owners is owned by or is
an affiliate of California Petroleum and neither of California Petroleum nor any
Owner is owned by or is an affiliate of the Initial Charterer.
The Charters
Each of the Vessels is currently chartered to the Initial Charterer pursuant to
a charter dated as of the date of the original issuance of the Notes
(collectively, the "Charters") and which are due to expire on April 1, 2015.
Upon payment of a termination amount (the "Termination Payment"), the Initial
Charterer has the right to terminate the charters on any four (in the case of
the double-hulled Vessels) or three (in the case of the single-hulled Vessel),
termination dates, which, for each Vessel, occur at two-year intervals beginning
in 2003, 2004, 2005 or 2006, respectively.
The International Tanker Market
Two types of operators mainly provide international seaborne oil and petroleum
products transportation services: major oil company captive fleets (both private
and state-owned) and independent shipowner fleets. Both types of operators
transport oil under short-term contracts (including single-voyage "spot
charters") and long-term time charters with oil companies, oil traders, large
oil consumers, petroleum product producers and government agencies. The oil
companies own, or control through long-term time charters, approximately one
third of the current world tanker capacity, while independent companies own or
control the balance of the fleet. The oil companies use their fleets not only to
transport their own oil, but also to transport oil for third-party charterers in
direct competition with independent owners and operators in the tanker charter
market.
The oil transportation industry has historically been subject to regulation by
national authorities and through international conventions. Over recent years,
however, an environmental protection regime has evolved which could have a
significant impact on the operations of participants in the industry in the form
of increasingly more stringent inspection requirements, closer monitoring of
pollution-related events, and generally higher costs and potential liabilities
for the owners and operators of tankers.
In order to benefit from economies of scale, tanker charterers will typically
charter the largest possible vessel to transport oil or products, consistent
with port and canal dimensional restrictions and optimal cargo lot sizes. The
oil tanker fleet is generally divided into the following five major types of
vessels, based on vessel carrying capacity: (i) ULCC-size range of approximately
320,000 to 450,000 deadweight tons (dwt); (ii) VLCC-size range of approximately
200,000 to 320,000; (iii) Suezmax-size range of approximately 120,000 to 200,000
dwt; (iv) Aframax-size range of approximately 60,000 to 120,000 dwt; and (v)
small tankers of less than approximately 60,000 dwt. ULCCs and VLCCs typically
transport crude oil in long-haul trades, such as from the Arabian Gulf to
Rotterdam via the Cape of Good Hope. Suezmax tankers also engage in long-haul
crude oil trades as well as in medium-haul crude oil trades, such as from West
Africa to the East Coast of the United States. Aframax-size vessels generally
engage in both medium-and short-haul trades of less than 1,500 miles and carry
crude oil or petroleum products. Smaller tankers mostly transport petroleum
products in short-haul to medium-haul trades.
The shipping industry is highly cyclical, experiencing volatility in
profitability, vessel values and charter rates. In particular, freight and
charterhire rates are strongly influenced by the supply and demand for shipping
capacity.
The charter rates for Suezmax tankers started to decline in the second half of
2001 as a result of a general slowdown in the global economy and reduction of
OPEC oil production. The negative trend continued into 2002 and rates remained
below USD 20,000 per day through a large part of the year. Rates finally started
to improve at the beginning of the 4th quarter and ended the year at above USD
50,000 per day. In spite of the rate improvement in the last quarter average
time charter equivalent spot earnings for the year came out just below USD
20,000 per day compared to just over USD 30,000 per day in 2001. Several factors
contributed to improving rates in the late part of the year including increased
seasonal demand and increased oil consumption in the Asian region, but the main
reason for the rate spike in the last months of the year was the strike in
Venezuela. The loss of exports from Venezuela, especially into the United
States, required replacement oil from more distant sources resulting in
increased tonnage demand. The strong market continued in January 2003. The weak
market in 2001 and 2002 resulted in scrapping of 48 elderly Suezmaxes in the two
years.
There is no guarantee that Suezmax rates would be sufficient to meet the debt
service required if the bareboat charters entered into with the Initial
Charterer are not extended. Spot market rates are volatile and generally linked
to global economic development and especially demand for oil but also to
political events affecting oil producing countries.
Risk Factors
California Petroleum derives 100% of its cash receipts from and is dependent on
the Owners, who are foreign corporations as described above. The Owners derive
100% of their revenues from and are dependent on the Initial Charterer until
such time as the Initial Charterer terminates the Charters. After the Charters
are terminated, the Owners may not be able to arrange further charters at rates
sufficient to meet interest and principal payments due to California Petroleum
on the serial and term loans. Should the Owners default on payment of interest
and principal due to California Petroleum, the value of collateral to the serial
and term loans may be insufficient to repay the serial and term loans.
It is not considered possible to quantify possible losses to California
Petroleum that may arise due to exposure to these risk factors.
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.
Vessel Construction Registration Delivery Date Approximate
dwt.
Samuel Ginn Double-hull Bahamas March 1993 150,000
Altair Voyager Double-hull Bahamas August 1993 130,000
Sirius Voyager(1) Double-hull Marshall Islands(3) October 1994 150,000
William E. Crain Single-hull Marshall Islands(3) February 1992 150,000
1 ex Chevron Mariner (renamed February 2001)
2 ex Condoleeza Rice (renamed April 2001)
3 previously registered in Liberia
Item 3. Legal Proceedings
California Petroleum and the Owners are not a party to any material pending
legal proceedings and no such proceedings are known to be contemplated.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
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) As of March 28, 2003 with respect to the Common Stock there was one (1)
holder of record of the Registrant's Common Stock.
Item 6. Selected Financial Data
The following selected historical financial and other data for Californian
Petroleum was devised from more detailed information and financial statements
and notes appearing elsewhere in this Annual Report and should be read in
conjunction therewith.
2002 2001 2000 1999 1998
$'000 $'000 $'000 $'000 $'000
Net operating revenues 13,808 15,210 16,538 17,871 19,191
Net income - - - - -
Net income per share - - - - -
Dividends per share - - - - -
Total assets 162,618 181,115 199,616 218,088 236,564
Long term liabilities 141,120 159,280 177,440 195,600 213,760
The following table sets forth a summary of quarterly results of operations for
the years ended December 31, 2002 and 2001.
First Second Third Fourth
Quarter Quarter Quarter Quarter
$'000 $'000 $'000 $'000
2002
Net operating revenues 3,601 3,308 3,326 3,573
Expenses 3,601 3,308 3,326 3,573
Net income - - - -
2001
Net operating revenues 4,051 3,691 3,750 3,718
Expenses 4,051 3,691 3,750 3,718
Net income - - - -
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Business Strategy
California Petroleum
California Petroleum's strategy has been to issue, as agent on behalf of the
Owners, the Notes and loan the proceeds of the sale of the Notes to the Owners.
California Petroleum's only sources of funds with respect to the Notes are
payments of interest and principal on the related loans from California
Petroleum to 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. California Petroleum has no source of income other
than payments to it by 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 included herein.
The Owners
The Owners' strategy has been to acquire the Vessels and charter them to the
Initial Charterer under bareboat charters which are expected to provide (a)
charterhire payments which California Petroleum and the Owners expect will be
sufficient to pay, so long as the Initial 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 Initial 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 Initial Charters; and to arrange for vessel management and remarketing
services to be available in case any Initial Charter is terminated by the
Initial Charterer or any Vessel is for any other reason returned to the
possession and use of the Owners.
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 Loans.
Critical Accounting Policies
California Petroleum's principal accounting policies are described in Note 2 to
the financial statements include in Item 8 of this Form 10-K. The most critical
accounting policies include:
o revenue and expense recognition
o accounting for deferred charges
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
No 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 instruments exposed to business risk inherent in
the international tanker market at December 31, 2002 is as follows:
Serial Loans
The principal balances of the Serial Loans earn interest at rates ranging from
7.55% to 7.62% and mature over a four-year period beginning April 1, 2003. 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 Principal
rate due
($ 000's)
April 1, 2003 7.55% 18,160
April 1, 2004 7.57% 12,950
April 1, 2005 7.60% 7,740
April 1, 2006 7.62% 2,530
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41,380
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The outstanding amount of serial loans as at December 31, 2002 was $41,380,000.
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 twelve-year period beginning nine years from
April 1, 1995. 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 Initial Charters is terminated and if all of the Initial Charters are
terminated on the earliest termination dates.
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Scheduled No initial All
payment date charters initial
terminated charters
$'000 terminated
$'000
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April 1, 2004 3,355 1,700
April 1, 2005 6,542 3,480
April 1, 2006 9,526 5,320
April 1, 2007 10,942 6,340
April 1, 2008 10,942 6,880
April 1, 2009 10,942 7,470
April 1, 2010 10,942 8,110
April 1, 2011 10,942 8,800
April 1, 2012 10,942 9,540
April 1, 2013 10,942 10,360
April 1, 2014 10,942 11,240
April 1, 2015 10,941 38,660
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117,900 117,900
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The outstanding amount of term loans at December 31, 2002 was $117,900,000.
Serial Mortgage Notes
The Serial Mortgage Notes bear interest at rates ranging from 7.55% to 7.62%
through maturity. The Notes mature over a four-year period beginning one-year
from April 1, 2003. Interest is payable semi-annually.
The outstanding serial notes have the following characteristics:
------------------------------------------------------------------------------
Maturity date Interest Principal
rate due
($ 000's)
------------------------------------------------------------------------------
April 1, 2003 7.55% 18,160
April 1, 2004 7.57% 12,950
April 1, 2005 7.60% 7,740
April 1, 2006 7.62% 2,530
------------------------------------------------------------------------------
41,380
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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
twelve-year sinking fund schedule commencing nine years from April 1, 1995.
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 is
terminated and if all of the Initial Charters are terminated on the earliest
termination dates.
------------------------------------------------------------------------------
Scheduled No initial All
payment date charters initial
terminated charters
$'000 terminated
$'000
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April 1, 2004 3,355 1,700
April 1, 2005 6,542 3,480
April 1, 2006 9,526 5,320
April 1, 2007 10,942 6,340
April 1, 2008 10,942 6,880
April 1, 2009 10,942 7,470
April 1, 2010 10,942 8,110
April 1, 2011 10,942 8,800
April 1, 2012 10,942 9,540
April 1, 2013 10,942 10,360
April 1, 2014 10,942 11,240
April 1, 2015 10,941 38,660
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117,900 117,900
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California Petroleum was organized solely for the purpose of issuing, as agent
on behalf of certain ship Owners, the Term Mortgage Notes and Serial Mortgage
Notes as obligations of California Petroleum and loaning the proceeds of the
sale of the Notes to the Owners, to facilitate the funding of the acquisition of
four Vessels from the Initial Charterer.
Item 8. Financial Statements and Supplementary Data Page
Report of Ernst & Young, Chartered Accountants, Independent Auditors 9
Balance Sheets as of December 31, 2002 and 2001 10
Statements of Operations and Retained Earnings for the Years Ended 11
December 31, 2002, 2001 and 2000
Statements of Cash Flows for the Years Ended 12
December 31, 2002, 2001 and 2000
Notes to Financial Statements 13
Report of Ernst & Young, Chartered Accountants, Independent Auditors
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, 2002 and 2001, and the related
statements of operations and retained earnings, and cash flows for each of the
three years in the period ended December 31, 2002. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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 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, 2002 and 2001, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
2002, in conformity with accounting principles generally accepted in the United
States of America.
/s/ Ernst & Young
Ernst & Young
Chartered Accountants
Douglas, Isle of Man
28 March, 2003
California Petroleum Transport Corporation
Balance Sheets as of December 31, 2002 and 2001
(in thousands of US$)
Note 2002 2001
ASSETS
Current assets:
Cash and cash equivalents 1 1
Current portion of serial loans receivable 3 18,160 18,160
Interest receivable 3,322 3,664
Other current assets 15 10
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Total current assets 21,498 21,835
Serial loans receivable, less current portion 3 22,882 40,874
Term loans receivable 4 116,818 116,730
Deferred charges and other long-term assets 2(b) 1,420 1,676
-------- --------
Total assets 162,618 181,115
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accrued interest 3,322 3,664
Current portion of serial mortgage notes 5,6 18,160 18,160
Other current liabilities 15 10
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Total current liabilities 21,497 21,834
Serial mortgage notes 5,6 23,220 41,380
Term mortgage notes 5,7 117,900 117,900
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Total liabilities 162,617 181,114
Stockholder's equity
Common stock, $1 par value; 1,000 shares
authorised, issued and outstanding 1 1
--------- ---------
Total liabilities and stockholder's equity 162,618 181,115
========= =========
See accompanying Notes to the Financial Statements
California Petroleum Transport Corporation
Statements of Operations and Retained Earnings for the years ended December 31,
2002, 2001 and 2000
(in thousands of US$)
2002 2001 2000
Revenue
Interest income 13,772 15,164 16,478
Fees reimbursed by related parties 36 46 60
------- -------- -------
Net operating revenues 13,808 15,210 16,538
Expenses
General and administrative expenses (36) (46) (60)
Amortisation of debt issue costs (256) (256) (256)
Interest expense (13,516) (14,908) (16,222)
-------- -------- --------
(13,808) (15,210) (16,538)
-------- -------- --------
Net income - - -
======== ======== ========
Retained earnings, beginning of year - - -
-------- -------- --------
Retained earnings, end of year - - -
======== ======== ========
See accompanying Notes to the Financial Statements
California Petroleum Transport Corporation
Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000
(in thousands of US$)
2002 2001 2000
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 assets and liabilities:
Decrease in interest receivable and other
current assets 337 341 312
Decrease in accrued interest and other
current liabilities (337) (341) (312)
-------- -------- -------
Net cash provided by operating activities 256 256 256
-------- -------- -------
Cash flows from investing activities
Collections on term and serial loans 17,904 17,904 17,904
-------- -------- --------
Net cash provided by investing activities 17,904 17,904 17,904
-------- -------- --------
Cash flows from financing activities
Repayments of serial notes (18,160) (18,160) (18,160)
-------- -------- --------
Net cash used in financing activities (18,160) (18,160) (18,160)
-------- -------- --------
Net change in cash and cash equivalents 0 0 0
Cash and cash equivalents at beginning
of year 1 1 1
-------- -------- --------
Cash and cash equivalents at end of year 1 1 1
======== ======== ========
Supplemental disclosure of cash flow
information:
Interest paid 13,858 15,213 17,186
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"), the 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 to facilitate the funding of the acquisition of four
vessels (the "Vessels") from Chevron Transport Corporation (the "Initial
Charterer").
The Owners have chartered the Vessels to the Initial Charterer under
bareboat charters that are expected to provide sufficient payments to cover
the Owners' obligations under the loans from the Company. The Initial
Charterer can terminate a charter at specified dates prior to the
expiration of the charter, provided it notify the Owner at least 12 months
prior to such termination and make a Termination Payment. The Owners' only
source of funds with respect to the loans from the Company is payments from
the Initial Charterer, 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 are payments
of principal and interest on the loans to 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 the Initial Charterer.
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 United States dollars.
(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 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. SERIAL LOANS
The principal balances of the Serial Loans earn interest at rates ranging
from 7.55% to 7.62% and mature over a four-year period beginning April 1,
2003. The loans are reported net of the related discounts, which are
amortised over the term of the loans.
4. 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 twelve-year period beginning nine
years from April 1, 1995. The loans are reported net of the related
discounts, which are amortised over the term of the loans.
5. SERIAL LOANS AND TERM LOANS COLLATERAL
The Serial and Term Loans are collateralised by first preference 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 Initial
Charters and Chevron Guarantees (where the obligations of the Initial
Charterer are guaranteed by Chevron 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 the Stock Pledge Agreements.
6. SERIAL MORTGAGE NOTES
The Serial Mortgage Notes bear interest at rates ranging from 7.55% to
7.62% through maturity. The Notes mature over a four-year period beginning
April 1, 2003. Interest is payable semi-annually.
The outstanding serial notes have the following characteristics:
------------------------------------------------------------------------------
Maturity date Interest Principal due
rate due
($ 000's)
------------------------------------------------------------------------------
April 1, 2003 7.55% 18,160
April 1, 2004 7.57% 12,950
April 1, 2005 7.60% 7,740
April 1, 2006 7.62% 2,530
------------------------------------------------------------------------------
41,380
------------------------------------------------------------------------------
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, 2002 and 2001, the Company was in compliance
with these covenants.
7. TERM MORTGAGE NOTES
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
twelve-year sinking fund schedule commencing nine years from April 1, 1995.
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 is terminated and if all of the Initial Charters are terminated on
the earliest termination dates.
------------------------------------------------------------------------------
Scheduled No initial All
payment date charters initial
terminated charters
$'000 terminated
$'000
------------------------------------------------------------------------------
April 1, 2004 3,355 1,700
April 1, 2005 6,542 3,480
April 1, 2006 9,526 5,320
April 1, 2007 10,942 6,340
April 1, 2008 10,942 6,880
April 1, 2009 10,942 7,470
April 1, 2010 10,942 8,110
April 1, 2011 10,942 8,800
April 1, 2012 10,942 9,540
April 1, 2013 10,942 10,360
April 1, 2014 10,942 11,240
April 1, 2015 10,941 38,660
------------------------------------------------------------------------------
117,900 117,900
------------------------------------------------------------------------------
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, 2002 and 2001, the Company was in compliance with these covenants.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Company does not have operations nor does it have any employees involved in
management. 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 D. Smith 35 Director and President
Geraldine St-Louis 27 Vice President
Louise E. Colby 54 Director and Assistant Secretary
R. Douglas Donaldson 61 Treasurer
Dimitris P.Spiliakos 25 Secretary
Officers are appointed by the Board of Directors and will serve until they
resign or are removed by the Board of Directors.
Nancy D. Smith 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 as 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.
Dimitris P. Spiliakos has been the Secretary of the Company since September
2002. He is currently a corporate paralegal at the law offices of Ropes & Gray
in Boston. From 1999 to 2001, he worked as a corporate paralegal at
Hutchins,Wheeler & Dittmar, a law firm in Boston.
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. Security Ownership of Certain Beneficial Owners and Management
The following table provides information as of March 28, 2003 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 25, 2003.
Beneficial Ownership
Name and Number
Class of address of of Percent
Shares Beneficial Owners Shares of Class
------ ----------------- ------ --------
Ordinary Shares The California Trust 1,000 100%
C/o JH Holdings Corporation
P.O. Box 4024
Room 6/9, One International Place
Boston
MA 02101
Item 13. Certain Relationships and Related Transactions
Not applicable.
Item 14. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's manager Frontline Ltd, including the Company's President and
Treasurer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the President and Treasurer concluded
that the Company's disclosure controls and procedures are effective in
alerting them timely to material information relating to the Company
required to be included in the Company's periodic Securities and Exchange
Commission (SEC) filings.
(b) Changes in internal controls
There have been no significant changes in our internal controls or in other
factors that could have significantly affected those controls subsequent to
the date of our most recent evaluation of internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this Annual Report:
Financial Statements
Report of Ernst & Young, Chartered Accountants, Independent Auditors
Balance Sheets at December 31, 2002 and 2001
Statements of Operations and Retained Earnings for the Years Ended December 31,
2002, 2001 and 2000
Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000
Notes to Financial Statements
Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
The Company has not filed any current reports on Form 8-K with the SEC during
the last quarter of the fiscal period covered by this report.
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 3/28/03 By /s/ Nancy D. Smith
------------------------------ ---------------------------------------
Nancy D. Smith
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 3/28/03 By /s/ Nancy D. Smith
------------------------------ ----------------------------------------
Nancy D. Smith
Director and President
Date 3/28/03 By /s/ R. Douglas Donaldson
------------------------------ ----------------------------------------
R. Douglas Donaldson
Director and Treasurer
CERTIFICATION OF THE PRESIDENT
- ------------------------------
I, Nancy D Smith, certify that:
1. I have reviewed this annual report on Form 10-K of California Petroleum
Transport Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: 3/28/03
/s/ Nancy D. Smith
- -----------------------
Nancy D. Smith
President
CERTIFICATION OF TREASURER
- --------------------------
I, R Douglas Donaldson, certify that:
1. I have reviewed this annual report on Form 10-K of California Petroleum
Transport Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: 3/28/03
/s/ R. Douglas Donaldson
- ---------------------------
R. Douglas Donaldson
Treasurer
Exhibit 99.1 CERTIFICATIONS UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the
undersigned certifies that this periodic report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and that information contained in this periodic report fairly represents, in all
material respects, the financial condition and results of operations of
California Petroleum Transport Corporation.
/s/ Nancy D. Smith
-------------------------
Nancy D. Smith
President
/s/ R. Douglas Donaldson
-------------------------
R. Douglas Donaldson
Treasurer
Date: 3/28/03
02089.0009 #395095