UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2005
Or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ----------------- to ----------------------------
Commission File Number: 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 of incorporation (I.R.S.Employer
or organization) Identification No.)
Suite 3218, One International Place, Boston, Massachusetts 02101-2916
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(Address of principal executive offices) (Zip Code)
(617) 951-7690
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2) of the Exchange Act) |_| Yes |X| No
Number of shares outstanding of each class of Registrant's Common Stock as of
July 22, 2005
Common, $1.00 par value ............................................1,000 shares
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Six month period ended June 30, 2005
Index
Part I Financial Information
Item 1 Financial Statements
Unaudited Statements of Operations and Retained Earnings - Three and
Six Month Periods Ended June 30, 2005 and 2004
Unaudited Balance Sheets - June 30, 2005 and December 31, 2004
Unaudited Statements of Cash Flows - Six Month Periods Ended June 30,
2005 and 2004
Unaudited Notes to the Financial Statements
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3 Quantitative and Qualitative Disclosures about Market Risk
Item 4 Controls and Procedures
Part II Other Information
Item 6 Exhibits
Signatures
Omitted items are not applicable
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
California Petroleum Transport Corporation
Statements of Operations and Retained Earnings (Unaudited)
(in thousands of US$)
3 month period ended 6 month period ended
June 30 June 30
2005 2004 2005 2004
Revenue
Interest income 2,395 2,651 5,030 5,595
Fees reimbursed by related parties 3 32 11 36
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Net operating revenues 2,398 2,683 5,041 5,631
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Expenses
General and administrative expenses (3) (32) (11) (36)
Amortization of debt issue costs 18 (64) (46) (128)
Interest expense (2,413) (2,587) (4,984) (5,467)
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(2,398) (2,683) (5,041) (5,631)
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Net income -- -- -- --
Retained earnings, beginning of period -- -- -- --
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Retained earnings, end of period -- -- -- --
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See notes to the financial statements (unaudited)
California Petroleum Transport Corporation
Balance Sheets (Unaudited)
(in thousands of US$)
June 30, December 31,
2005 2004
ASSETS
Current assets:
Cash and cash equivalents 1 1
Current portion of serial loans receivable 2,530 7,740
Current portion of term loans receivable 9,526 6,542
Interest receivable 2,349 2,635
Other current assets 11 32
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Total current assets 14,417 16,950
Serial loans receivable, less current portion -- 2,528
Term loans receivable, less current portion 97,615 107,097
Deferred charges and other long-term assets 862 908
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Total assets 112,894 127,483
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LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accrued interest 2,349 2,635
Current portion of serial mortgage notes 2,530 7,740
Current portion of term mortgage notes 9,526 6,542
Other current liabilities 11 32
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Total current liabilities 14,416 16,949
Serial mortgage notes, less current portion -- 2,530
Term mortgage notes, less current portion 98,477 108,003
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Total liabilities 112,893 127,482
Stockholder's equity
Common stock, $1 par value; 1,000 shares
authorized, issued and outstanding 1 1
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Total liabilities and stockholder's equity 112,894 127,483
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See notes to the financial statements (unaudited)
California Petroleum Transport Corporation
Statements of Cash Flows (Unaudited)
(in thousands of US$)
6 month period ended
June 30,
2005 2004
Cash flows from operating activities
Net income -- --
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred debt issue costs 46 128
Amortization of issue discount on loan receivable (46) (128)
Changes in operating assets and liabilities:
Decrease in interest receivable 286 309
Decrease (increase) in other current assets 21 (21)
Decrease in accrued interest (286) (309)
Increase (decrease) in other current liabilities (21) 21
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Net cash provided by operating activities -- --
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Investing Activities
Collections on serial and term loans receivable 14,282 16,305
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Net cash provided by investing activities 14,282 16,305
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Financing Activities
Repayments of serial and term mortgage notes (14,282) (16,305)
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Net cash used in financing activities (14,282) (16,305)
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Net increase in cash and cash equivalents -- --
Cash and cash equivalents at beginning of period 1 1
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Cash and cash equivalents at end of period 1 1
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Supplemental disclosure of cash flow information:
Interest paid 5,270 5,904
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See notes to the financial statements (unaudited)
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Six month period ended June 30, 2005
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
California Petroleum Transport Corporation (the "Company" or "California
Petroleum"), 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") by the Owners 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.
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. Chevron Transport
Corporation 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. Refer to Note 7.
for subsequent events. The Owners' only source of funds with respect to the
loans from the Company is payments from Chevron Transport Corporation,
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 the
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 Chevron Transport Corporation.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by US GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. The principal accounting policies used in the
preparation of these financial statements are set out below.
The balance sheet at December 31, 2004 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by US GAAP for complete financial
statements.
These financial statements should be read in conjunction with the audited
financial statements and accompanying notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2004.
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. SERIAL LOANS
The principal balances of the Serial Loans earn interest at 7.62% and
mature on April 1, 2006. The loans are reported net of the related
discounts, which are amortized 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 remaining ten-year period beginning
April 1, 2006. The loans are reported net of the related discounts, which
are amortized over the term of the loans.
5. SERIAL LOANS AND TERM LOANS COLLATERAL
The Serial and Term Loans are collateralized 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.
6. 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 $) June 30, 2005 December 31, 2004
Debt arrangement fees 3,400 3,400
Accumulated amortization (2,538) (2,492)
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862 908
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7. CANCELLATION OF BAREBOAT CHARTER
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. Subsequently, on April 21, 2005 Bahamas III
received irrevocable notice from Chevron to terminate the bareboat charter
for Virgo Voyager on April 1, 2006. On April 28, 2005 a Form 8-K Current
Report was filed stating this change. Frontline Ltd, as the appointed
manager to the Owner, will attempt to arrange for an acceptable replacement
charter.
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Six month period ended June 30, 2005
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Organization and History
California Petroleum Transport Corporation (the "Company") was incorporated
under the laws of the state of Delaware on May 18, 1994. The Company is a
special purpose corporation that has been organized solely for the purpose of
issuing, as agent on behalf of the Owners, Serial Mortgage Notes and Term
Mortgage Notes (the "Notes") as full recourse obligations of the Company and
loaning the proceeds of the sale of the Notes to the Owners (the "Loans"). The
Notes were issued on April 5, 1995.
Results of Operations
The net change in interest income and interest expense decreased by the same
amount over the three month period ended June 30, 2005 and June 30, 2004 and the
six month period ending June 30, 2005 compared to June 30, 2004. This represents
interest received on Term and Serial Loans and interest paid on Term and Serial
Notes. Interest income and expense decrease every year along with the balance on
the Loans and Notes. Interest income and expense for the three month period June
30, 2005 compared to 2004 and the six month period ended June 30, 2005 compared
to 2004 amounts were similar as interest is paid and received semi-annually on
April and October 1 each year. Amortization of debt issue costs has decreased in
the three month period ended June 30, 2005 compared to 2004 and the six month
period ended June 30, 2005 compared to 2004 as the debt issue costs relating to
the Serial Loans have been fully amortized.
Financial Condition
Current and long-term portions of serial loans and notes have decreased at June
30, 2005 as a payment was made and received on April 1, 2005 with the last
payment and receipt to follow on April 1, 2006. Current and long-term portions
of term loans and notes have decreased at June 30, 2005 as a payment was made
and received on April 1, 2005. Accordingly, accrued interest and interest
receivable over the period ended June 30, 2005 decreased by the same amount as
the balance of the notes and loans decreased. Other current liabilities and
other current assets decreased by the same amounts representing the payment and
reimbursement by the Owners of administrative expenses during the period. As
detailed in Note 6., deferred charges were amortized for the six month period.
There were no other changes on the balance sheet for the six month period ended
June 30, 2005.
Liquidity and Capital Resources
The Company is a passive entity, and its activities are limited to collecting
cash from the Owners and making repayments on the Notes. The Company has no
source of liquidity and no capital resources other than the cash receipts
attributable to the Loans.
Off-balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have, or are reasonably
likely to have, a material current effect or that are reasonably likely to have
a material future effect on our financial condition, revenues or expenses,
liquidity, capital expenditures or capital reserves.
Critical Accounting Policies
There have been no material changes to our critical accounting policies and
estimates from the information provided in Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations included in our 2004
Form 10-K.
New Accounting Standards
There were no new accounting standards that would have an impact on the
Company's results.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(a) Quantitative information about market risk
Quantitative information about market risk instruments at June 30, 2005 is
as follows:
(in thousands of $)
7.62% Serial Mortgage Notes 2,530
8.52% Term Mortgage Notes due 2015 108,003
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Total debt 110,533
Less: short-term portion (12,056)
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98,477
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The outstanding debt as of June 30, 2005 is repayable as follows:
(in thousands of $)
Year ending December 31,
2006 12,056
2007 10,942
2008 10,942
2009 10,942
2010 and later 65,651
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Total debt 110,533
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The serial mortgage notes bear interest at 7.62% and mature on April 1,
2006. 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 June 30, 2005 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 June 30, 2005, the Company
was in compliance with these covenants.
As of June 30, 2005, the effective interest rate for the Notes of the
Company was 8.50%.
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 dollars)
Scheduled Charter Charter Charter Charter Charter Charter Charter
payment not terminated terminated terminated terminated terminated terminated
date terminated 2006 2007 2008 2009 2010 2011
2006 9,526 3,187 6,339 3,187 6,339 3,187 2,984
2007 10,942 2,270 6,339 3,187 6,339 3,187 2,984
2008 10,942 2,460 3,390 3,187 6,339 3,187 2,984
2009 10,942 2,670 3,680 1,690 6,339 3,187 2,984
2010 10,942 2,900 3,990 1,830 3,240 3,187 2,984
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2011 and
later 54,709 31,122 39,656 18,784 34,798 15,930 14,922
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108,003 44,609 63,394 31,865 63,394 31,865 29,842
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(b) Qualitative information about market risk
The Company was organized solely for the purpose of issuing, as agent on
behalf of the Owners, the Term Mortgage Notes and Serial Mortgage Notes as
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 the
Vessels from Chevron Transport Corporation.
ITEM 4 - CONTROLS AND PROCEDURES
(a) Evaluation of disclosure 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 June 30, 2005. Based on that evaluation, the Company's
President and Treasurer concluded that the Company's disclosure controls
and procedures were effective as of June 30, 2005.
(b) Changes in internal controls
There were no material changes in the Company's internal control over
financial reporting during the second quarter of 2005.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 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
Exhibit 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
Exhibit 32.1 Certification of Principal Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2 Certification of Principal Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted 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 current quarter of the fiscal period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
California Petroleum Transport Corporation
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(Registrant)
Date August 12, 2005 By /s/ Nancy D. Smith
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Nancy D. Smith
Director and President
Date August 12, 2005 By /s/ R Douglas Donaldson
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R. Douglas Donaldson
Treasurer and Principal Financial Officer
02089.0006 #594060