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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, 2004
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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 033-79220
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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 3218, One International Place, Boston, Massachusetts, 02110-2624
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(Address of principal executive offices)
(617) 951-7690
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(Registrant's telephone number, including area code)
Name of each exchange
Title of each class on which registered
None Not applicable
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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. [X] Yes [_] 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]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). [_] Yes [X] No
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 last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant' most recently completed second fiscal
quarter. None
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of March 31, 2005. 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..................................................... 7
Item 3. Legal Proceedings.............................................. 7
Item 4. Submission of Matters to a Vote of Security Holders............ 7
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.............. 8
Item 6. Selected Financial Data........................................ 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 8
Item 7(A). Quantitative and Qualitative Disclosures about Market Risk..... 10
Item 8. Financial Statements and Supplementary Data.................... 13
Item 9. Changes in and Disagreements with Accountants on Accounting
And Financial Disclosure....................................... 23
Item 9(A). Controls and Procedures........................................ 23
Item 9 (B). Other Information.............................................. 23
PART III
Item 10. Directors and Executive Officers of the Registrant............. 24
Item 11. Executive Compensation......................................... 24
Item 12. Security Ownership of Certain Beneficial Owners
And Management................................................. 25
Item 13. Certain Relationships and Related Transactions................. 25
Item 14. Principal Accountants Fees and Services........................ 25
PART IV
Item 15. Exhibits and Financial Statement Schedules..................... 27
Signatures ................................................................ 31
PART I
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Matters discussed in this document may constitute forward-looking statements.
The Private Securities Litigation Reform Act of 1995 provides safe harbor
protections for forward-looking statements in order to encourage companies to
provide prospective information about their business. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance, and underlying assumptions and other statements, which
are other than statements of historical facts.
California Petroleum Transport Corporation (the "Company") desires to take
advantage of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and is including this cautionary statement in connection with
this safe harbor legislation. This document and any other written or oral
statements made by us or on our behalf may include forward-looking statements,
which reflect our current views with respect to future events and financial
performance. The words "believe," "expect," "anticipate," "intends," "estimate,"
"forecast," "project," "plan," "potential," "will," "may," "should" and similar
expressions identify forward-looking statements.
The forward-looking statements in this document are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, management's examination of historical operating
trends, data contained in our records and other data available from third
parties. Although we believe that these assumptions were reasonable when made,
because these assumptions are inherently subject to significant uncertainties
and contingencies which are difficult or impossible to predict and are beyond
our control, we cannot assure you that we will achieve or accomplish these
expectations, beliefs or projections.
In addition to these important factors and matters discussed elsewhere herein
and in the documents incorporated by reference herein, important factors that,
in our view, could cause actual results to differ materially from those
discussed in the forward-looking statements include the strength of world
economies and currencies, general market conditions, including fluctuations in
charterhire rates and vessel values, changes in demand in the tanker market,
including changes in demand resulting from changes in OPEC's petroleum
production levels and world wide oil consumption and storage, changes in the
Company's operating expenses, changes in governmental rules and regulations or
actions taken by regulatory authorities, potential liability from pending or
future litigation, general domestic and international political conditions,
potential disruption of shipping routes due to accidents or political events,
and other important factors described from time to time in the reports filed by
the Company with the Securities and Exchange Commission.
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 from Chevron Transport Corporation, or Chevron. 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") was 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 is also referred to in this document as an
"Owner". Each Owner will only engage in the business of the ownership and
chartering of its Vessel and activities resulting from or incidental to such
ownership and chartering. Each Owner is an ultimate wholly-owned subsidiary of
Frontline Ltd ("Frontline"), a publicly listed Bermuda 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 Chevron.
The Charters
Each Vessel is currently chartered to Chevron under charters 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. Under the Charters, Chevron can elect
to terminate the Charter on any of four ( in the case of the double-hulled
Vessels) or three (in the case of the single-hulled Vessel) termination dates
occurring at two-year intervals beginning in 2003, 2004, 2005 or 2006 as the
case may be. Non-binding notice of Chevron's intention to exercise the first
option to terminate must be given at least 12 months prior to the termination
date and irrevocable notice must be given at least nine months prior to the
first optional termination date. For subsequent optional termination dates,
notice of Chevron's intention to terminate must be given seven months prior to
the termination date. Chevron is required to pay each Owner a termination
payment (the "Termination Payment") on or prior to the termination date as
follows:
(In millions of $)
Optional Cygnus Altair Sirius Virgo
Termination Date Voyager Voyager Voyager Voyager
- ---------------- ------- ------- ------- -------
April 1, 2005 12.26 10.93
April 1, 2006 11.11 5.05
April 1, 2007 11.12 9.91
April 1, 2008 10.03 4.57
April 1, 2009 9.97 8.89
April 1, 2010 8.94 4.08
April 1, 2011 7.88
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 effective April 1, 2006. Chevron is required to provide
irrevocable notice of its exercise of the termination option not later than
July 1, 2005.
The International Tanker Market
The market for international seaborne crude oil transportation services is
highly fragmented and competitive. Seaborne crude oil transportation services
generally are provided by two main types of operators: major oil company captive
fleets (both private and state-owned) and independent shipowner fleets. In
addition, several owners and operators pool their vessels together on an ongoing
basis, and such pools are available to customers to the same extent as
independently owned and operated fleets. Many major oil companies and other oil
trading companies, the primary charterers of the vessels owned or controlled by
the Owners, also operate their own vessels and use such vessels not only to
transport their own crude oil but also to transport crude oil for third party
charterers in direct competition with independent owners and operators in the
tanker charter market. Competition for charters is intense and is based upon
price, location, size, age, condition and acceptability of the vessel and its
manager. Competition is also affected by the availability of other size vessels
to compete in the trades in which the Owners engage.
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 dwt;
(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
charter hire rates are strongly influenced by the supply and demand for shipping
capacity.
2004 was a good year for the tanker market as freight rates increased
dramatically compared to 2003, mainly due to limited fleet growth and strong
growth in the demand for oil, and implicitly for oil tankers.
According to IEA, world oil demand grew by 2.65 million barrels per day (mb/d)
compared to 2003 with the total world demand ending up at 82.44 mb/d. The main
driver for this growth was the strong economic growth in China and the USA
resulting in record import levels.
The world supply of oil increased with 3.39 mb/d from 2003 to a total of 83.03
mb/d in 2004. The rapid economic growth in China led to a large growth in
imports of oil into China during the year. In addition, hurricane Ivan which hit
the US Gulf led to the shut down of oil production in the area which had to be
replaced by additional imports. This resulted in strong demand for VLCCs, and a
very healthy market for most of the year. The continuing unrest in Iraq kept the
output from that country to about 1.9 mb/d. compared with a pre-war level of
approximately 2.2 mb/d. However, the shortfall in production from Iraq was
replaced by increased production in the rest of the OPEC countries.
The size of the world suezmax fleet increased by 5 percent in 2004 from 295
vessels to 310. A total of 11 suezmaxes were scrapped and 26 were delivered. The
total order book for suezmaxes was at 76 at the end of the year, of which 30
were ordered during the year. The total order books for Suezmaxes was at 24.51
percent of the existing fleet.
The outlook for the tanker market for the remainder of 2005 is positive since it
seems that the continued growth in oil consumption will ensure a positive demand
situation for tankers. The freight forward market for 2005 is now at $38,500 per
day for Suezmax tankers.
Risk Factors
California Petroleum's capitalisation is nominal and it has no source of income
other than payments to it by the Owners who are foreign corporations as
described above. As a result, it is exposed to risk factors affecting the
Owners. The following is a summary of some of the risks which may adversely
affect the business, financial condition or results of operations of California
Petroleum. It is not considered possible to quantify possible losses to
California Petroleum that may arise due to exposure to these risk factors.
The cyclical nature of the tanker industry may lead to volatile changes in
charter rates, which may adversely affect the earnings of the Owners
The Vessels are currently operated under the Charters to Chevron. The Charters
each have a term expiring on April 1, 2015, subject to Chevron having an option
to terminate the Charters at earlier dates as discussed above. The Owner of the
single hull vessel received non-binding notice of Chevron's intention to
exercise its first termination option effective April 1, 2006. Chevron is
required to provide irrevocable notice of its exercise of the termination option
no later than July 1, 2005.
If the tanker industry, which has been cyclical, is depressed in the future when
the Charters expire or are terminated, the earnings and available cash flow of
the Owners may decrease. The Owners ability to recharter the Vessels on the
expiration or termination of the current Charters and the charter rates payable
under any renewal or replacement charters will depend upon, among other things,
economic conditions in the tanker market. Fluctuations in charter rates and
vessel values result from changes in the supply and demand for tanker capacity
and changes in the supply and demand for oil and oil products. 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 Notes.
Because the Owners' Charters may be terminated, they may incur additional
expenses and not be able to recharter the Vessels profitably
Chevron can elect to terminate the Charter on any of four ( in the case of the
double-hulled Vessels) or three (in the case of the single-hulled Vessel)
termination dates occurring at two-year intervals beginning in 2003, 2004, 2005
or 2006 as the case may be. Non-binding notice of Chevron's intention to
exercise the first option to terminate must be given at least 12 months prior to
the termination date and irrevocable notice must be given at least nine months
prior to the first optional termination date. For subsequent optional
termination dates, notice of Chevron's intention to terminate must be given
seven months prior to the termination date. 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.
We cannot predict at this time any of the factors that Chevron will consider in
deciding whether to exercise any of its remaining termination options under the
Charters. It is likely, however, that Chevron would consider a variety of
factors, which may include whether a vessel is surplus or suitable to Chevron's
requirements and whether competitive charterhire rates are available in the open
market at that time.
In the event Chevron does terminate any of the Charters, it is required under
the terms of the Charter to make a termination payment to the relevant vessel
owner. The amount of the termination payment is not expected to be sufficient to
cover the Owners' obligations to California Petroleum under the Notes. If
Chevron terminates the Charter, the Owners will attempt to arrange a replacement
charter, or may sell the Vessel to satisfy its obligations under the Notes. We
cannot assure you that the Owner will be able to meet these obligations upon a
termination of a charter. Replacement charters may include shorter-term time
charters and employing the Vessel on the spot charter market (which is subject
to greater fluctuation than the time charter market). Any replacement charter
may bring the Owners lower charter rates and would likely require them to incur
greater expenses which may reduce the amounts available, if any, to pay
principal and interest on the serial and term loans due to California Petroleum.
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 Notes.
The Owners operate in the highly competitive international tanker market which
could affect their position at the end of the current Charters or if Chevron
terminates the Charters earlier
The operation of tanker vessels and transportation of crude and petroleum
products is an extremely competitive business. Competition arises primarily from
other tanker owners, including major oil companies as well as independent tanker
companies, some of whom have substantially greater resources than the Owners.
Competition for the transportation of oil and oil products can be intense and
depends on price, location, size, age, condition and the acceptability of the
tanker and its operators to the charterers. During the term of the existing
Charters with Chevron, the Owners are not exposed to the risk associated with
this competition. At the end of the current Charters or in the event that
Chevron terminates any charter at any of the optional termination dates, the
Owners will have to compete with other tanker owners, including major oil
companies as well as independent tanker companies for charters. Due in part to
the fragmented tanker market, competitors with greater resources could enter and
operate larger fleets through acquisitions or consolidations and may be able to
offer better prices and fleets, which could result in the Owners achieving lower
revenues from their Suezmax oil tankers which will reduce the amounts available,
if any, to pay the principal and interest on the serial and term loans due to
California Petroleum. 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 Notes.
Compliance with environmental laws or regulations may adversely affect the
Owners earnings and financial conditions at the end of the existing Charters or
if Chevron terminates the Charters prior to that time
Regulations in the various states and other jurisdictions in which the Vessels
trade affect the business of the Owners. Extensive and changing environmental
laws and other regulations, compliance with which may entail significant
expenses, including expenses for ship modifications and changes in operating
procedures, affect the operation of the Vessels. Although Chevron is responsible
for all operational matters and bears all these expenses during the term of the
current Charters, these expenses could have an adverse effect on the Owners'
business operations at any time after the expiration or termination of the
Charters or in the event Chevron fails to make a necessary payment.
An acceleration of the current prohibition to trade deadlines for non-double
hull tankers could adversely affect the Owners operations
One of the Vessels is a non-double hull tanker. The United States, the European
Union and the International Maritime Organization, or the IMO, have all imposed
limits or prohibitions on the use of these types of tankers in specified markets
after certain target dates, which range from 2010 to 2015. The sinking of the
single hull m.t. Prestige offshore in Spain in November 2002 has led to
proposals by the European Union and the IMO to accelerate the prohibition to
trade of all non-double hull tankers, with certain limited exceptions. In
December 2003, the Marine Environmental Protection Committee of the IMO adopted
a proposed amendment to the International Convention for the Prevention of
Pollution from Ships to accelerate the phase out of single hull tankers from
2015 to 2010 unless the relevant flag states extend the date to 2015. This
proposed amendment will take effect in April 2005 unless objected to by a
sufficient number of states. We do not know whether the non-double hull vessel
will be subject to this accelerated phase-out, but this change could result in
the Vessel being unable to trade in many markets after 2010. Moreover, the IMO
may still adopt regulations in the future that could adversely affect the useful
life of the non-double hull vessel as well as the Owner's ability to generate
income which will affect the Owner's ability to service its debt to the Company.
The Owners may not have adequate insurance in the event existing charters are
terminated
There are a number of risks associated with the operation of ocean-going
vessels, including mechanical failure, collision, property loss, cargo loss or
damage and business interruption due to political circumstances in foreign
countries, hostilities and labour strikes. In addition, the operation of any
vessel is subject to the inherent possibility of marine disaster, including oil
spills and other environmental mishaps, and the liabilities arising from owning
and operating vessels in international trade. Under the Charters, Chevron bears
all risks associated with the operation of the Vessels including the total loss
of the Vessels. However, we cannot assure holders of the Notes that the Owners
will adequately insure against all risks at the end of the Charters or in the
event the Charters are terminated. The Owners may not be able to obtain adequate
insurance coverage at reasonable rates for the Vessels in the future and the
insurers may not pay particular claims.
The Owners are highly dependent on Chevron and ChevronTexaco Corporation
The Owners are highly dependent on the due performance by Chevron of its
obligations under the Charters and by its guarantor, ChevronTexaco Corporation,
of its obligations under its guarantee. A failure by Chevron or ChevronTexaco
Corporation to perform their obligations could result in the inability of the
Owners to service the serial and term loans. If the Notes holders had to enforce
the mortgages securing the Notes, they may not be able to recover the principal
and interest owed to them.
The Owners may not be able to pay down their debt in the future
The Owners currently must dedicate a large portion of our cash flow from
operations to satisfy their debt service obligations to California Petroleum.
Their ability to pay interest on, and other amounts due in respect of, the
serial and term loans will depend on their future operating performance,
prevailing economic conditions and financial, business and other factors, many
of which are beyond their control. There can be no assurance that their cash
flow and capital resources will be sufficient for payment of their indebtedness
in the future. If the Owners are unable to service their indebtedness or obtain
additional financing, as needed, this could have a material adverse effect on
the holders of the Notes.
Governments could requisition the Vessels during a period of war or emergency,
resulting in a loss of earnings
A government could requisition for title or seize the Vessels. Requisition for
title occurs when a government takes control of a vessel and becomes her owner.
Also, a government could requisition the Vessels for hire. Requisition for hire
occurs when a government takes control of a vessel and effectively becomes her
charterer at dictated charter rates. Generally, requisitions occur during a
period of war or emergency. Government requisition of the Vessels would
negatively impact the revenues of the Owners and therefore impact their ability
to service the debt due to California Petroleum.
The Notes may not be as liquid as other securities with established trading
markets, which may affect the value of the Notes and your ability to trade them
The Notes are not listed on any national securities exchange or traded on the
NASDAQ National Market and have no established trading market. Consequently, the
Notes could trade at prices that may be higher or lower than their principal
amount or purchase price, depending on many factors, including prevailing
interest rates, the market for similar notes and warrants, and our financial
performance. The placement agents for the Notes currently make a market for the
Notes, but are not obligated to do so and may discontinue their market making
activity at any time. In addition, their market making activity is subject to
the limits imposed by the Securities Act and the Exchange Act. We cannot assure
you that an active trading market exists for the Notes or that any market for
the Notes will be liquid.
Available Information
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with these requirements, the
Company files reports and other information with the Securities and Exchange
Commission. These materials, including this annual report and the accompanying
exhibits, may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549. You may obtain information on the operation of the public reference
room by calling 1 800 SEC-0330, and you may obtain copies at prescribed rates
from the Public Reference Section of the Commission at its principal office in
Washington, D.C. 20549. The SEC maintains a website (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. In addition,
documents referred to in this annual report may be inspected at the Company's
principal executive offices at Suite 3218, One International Place, Boston,
Massachusetts, 02110-2624 or at the offices of the Company's manager at
Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, Bermuda HM 08.
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. 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. 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. 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. 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.
Year ended December 31,
($'000s except per share data) 2004 2003 2002 2001 2000
- ------------------------------ ---- ---- ---- ---- ----
Total operating revenues 10,922 12,450 13,808 15,210 16,538
Net income - - - - -
Net income per share - - - - -
Dividends per share - - - - -
Total assets 127,483 144,090 162,618 181,115 199,616
Long term liabilities 110,533 124,815 141,120 159,280 177,440
Cash dividends declared per share - - - - -
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
------- ------- ------- -------
2004
Net operating revenues 2,948 2,683 2,642 2,649
Expenses 2,948 2,683 2,642 2,649
Net income - - - -
2003
Net operating revenues 3,246 3,116 3,051 3,037
Expenses 3,246 3,116 3,051 3,037
Net income - - - -
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 $'000) 1 year years years 5 years Total
- ---------- ------ ----- ----- ------- -----
Serial Mortgage Notes
(7.60 to 7.62%) 7,740 2,530 - - 10,270
Term Mortgage Notes (8.52%) 6,542 20,468 21,884 65,651 114,545
------- ------- ------- ------- --------
Total contractual obligations 14,282 22,998 21,884 65,651 124,815
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
None of the instruments issued by California Petroleum are for trading purposes.
California Petroleum is exposed to business risk inherent in the international
tanker market as outlined in Risk Factors.
Quantitative information about the instruments as at December 31, 2004 is as
follows:
Serial Loans
The principal balances of the serial loans made to the Owners earn interest at
rates ranging from 7.60% to 7.62% and mature over a remaining two-year period
beginning April 1, 2005. The loans are reported net of the related discounts,
which are amortized over the term of the loans.
The outstanding serial loans have the following characteristics:
Maturity date Interest rate Principal due
($ 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. 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.
(in thousands of $)
Scheduled Charter Charter Charter Charter Charter Charter Charter Charter
payment not terminated terminated terminated terminated terminated terminated terminated
date terminated 2005 2006 2007 2008 2009 2010 2011
- ---- ---------- ---- ---- ---- ---- ---- ---- ----
2005 6,542 3,355 3,187 3,355 3,187 3,355 3,187 -
2006 9,526 3,330 3,187 6,339 3,187 6,339 3,187 2,984
2007 10,942 3,610 2,270 6,339 4,603 6,339 4,603 2,984
2008 10,942 3,920 2,460 3,390 4,603 6,339 4,603 2,984
2009 10,942 4,260 2,670 3,680 2,180 6,339 4,603 2,984
2010 and later 65,651 48,274 34,022 43,646 30,036 38,038 27,613 17,906
- -----------------------------------------------------------------------------------------------------------------------
114,545 66,749 47,796 66,749 47,796 66,749 47,796 29,842
=======================================================================================================================
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:
2004 2004 2003 2003
Fair Value Carrying Value Fair Value Carrying Value
---------- -------------- ---------- --------------
Non-Derivatives:
Cash and cash equivalents 1 1 1 1
Serial Mortgage Notes (7.60% to 7.62%) maturing 10,448 10,270 24,224 23,220
through 2006 8.52% Term Mortgage Notes due 2015 131,297 114,545 131,839 117,900
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. 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. 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. Other Information
Not Applicable
PART III
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. 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 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. Certain Relationships and Related Transactions
Not applicable.
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. 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 F-1, 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 F-1,
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 F-1, 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
F-1, 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 F-1,
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 F-1, 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 F-1, 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
F-1, 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
2002
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
2002
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