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, 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
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 organisation)
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)
Title of each class Name of each exchange
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 if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [_] Yes [X] No
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. [_] Yes [X] No
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 a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [_] Accelerated filer [_] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (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 February 28, 2006.
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 1A. Risk Factors................................................... 4
Item 1B. Unresolved Staff Comments...................................... 7
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.............. 7
Item 6. Selected Financial Data........................................ 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 8
Item 7A. Quantitative and Qualitative Disclosures about Market Risk..... 9
Item 8. Financial Statements and Supplementary Data.................... 11
Item 9. Changes in and Disagreements with Accountants on Accounting
And Financial Disclosure....................................... 20
Item 9A. Controls and Procedures........................................ 20
Item 9B. Other Information.............................................. 21
PART III
Item 10. Directors and Executive Officers of the Registrant............. 21
Item 11. Executive Compensation......................................... 22
Item 12. Security Ownership of Certain Beneficial Owners And Management
and Related Stockholder Matters................................ 22
Item 13. Certain Relationships and Related Transactions................. 22
Item 14. Principal Accountants Fees and Services........................ 22
PART IV
Item 15. Exhibits and Financial Statement Schedules..................... 23
Signatures 27
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, (the "Company") was incorporated in
Delaware in 1995. We are a special purpose corporation organised 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 ours and loaning the proceeds of the sale to the Owners, by means of term 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 of our shares 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.
We have 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 organised 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 organised 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 in addition to 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 affiliated with, us and neither we 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 remaining termination
dates as follows:
(In millions of $)
Optional Cygnus Voyager Altair Sirius Virgo
Termination Date Voyager Voyager Voyager
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 April 21, 2005, pursuant to Clause 2 (a) (ii) of the bareboat charter dated
April 5, 1995 between CalPetro Tankers (Bahamas III) Limited and Chevron, the
Owner received irrevocable notice from Chevron regarding the termination of the
bareboat charter of the vessel Virgo Voyager on April 1, 2006.
As the appointed manager to the Owner, Frontline will attempt to arrange for an
acceptable replacement charter. Should an acceptable replacement charter be
unavailable, Frontline will solicit bids for the sale of the vessel and if there
are no bids that provide net proceeds that, together with the termination
payment, at least equal the allocated principal amount of the Registrant's term
mortgage notes plus any interest accrued, Frontline will forward to the
appointed Indenture Trustee copies of all bids for the recharter of the vessel.
Unless instructed by all the holders of the Term Mortgage Notes to accept a sale
bid that is below the required minimum bid, Frontline will attempt to recharter
the vessel on such terms as it deems appropriate provided that
o such charter is at arms length;
o such charter shall have a termination date no later than April 1,
2015;
and the charterhire payable is sufficient to make the mandatory sinking fund
payments together with all related interest, recurring fees and taxes for the
vessel and the cost of insurance not maintained by the charterer, management
fees and technical advisor's fees and the fees of the designated representative,
the indenture trustee and the collateral trustee as defined in the prospectus
for the Registrant's 8.52% First Preferred Mortgage Notes due 2015.
On March 31, 2006, Frontline announced that an acceptable replacement charter
had been negotiated with one of its wholly owned subsidiaries replacing Chevron
as the bareboat charterer with effect from April 1, 2006. The charter will
follow the existing contract with the hire for the two year period from to March
31, 2008 being prepaid on April 1, 2006. The new charter will contain seven
annual options to extend the charter and will provide sufficient funds to honour
the mandatory sinking fund payments and all related expenses .
The International Tanker Market
The market for international seaborne crude oil transportation services is
highly fragmented and competitive. Seaborne crude oil transportation services
are generally 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:
o ULCC-size range of approximately 320,000 to 450,000 deadweight tons
(dwt);
o VLCC-size range of approximately 200,000 to 320,000 dwt;
o Suezmax-size range of approximately 120,000 to 200,000 dwt;
o Aframax-size range of approximately 60,000 to 120,000 dwt; and
o 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.
For the third year in a row the tanker market was very profitable for the tanker
owners. Even if 2005 could not compete with 2004 for crude carriers, it was the
second best year since the 1970s.
The main routes for Suezmax vessels started the year at a healthy Worldscale
("WS") 215 with a relatively volatile but steady decline towards what appeared
to be the floor in 2005 at approximately WS 100 in the beginning of August. The
trend from 2004 became evident also for 2005 and the rates increased steadily
from August until year-end, ending at approximately WS 275. The average for the
year was approximately WS 165.
The most important trend in the global oil market in 2005 was the stagnation of
oil production outside OPEC. At the beginning of the year the International
Energy Agency ("IEA") expected an increase in non-OPEC production of more than
one million barrels per day ("mbd"). Hurricane- related supply disruptions in
the US Gulf, higher North Sea depletion rates than anticipated and a more
moderate growth in Russian oil output were the main elements behind the
stagnation of non-Opec production. The consequence of less oil from non-OPEC
sources was an increased demand for OPEC oil. Since OPEC already produced at
almost full capacity most of the extra demand resulted in higher prices.
IEA reported in February 2006 an average OPEC Oil production, including Iraq, of
approximately 29.2 mbd during 2005, a 0.59 mbd or 2.0% increase from 2004. IEA
further estimates an average world oil demand at 83.3 mbd in 2005, a 1.3%
increase from 2004.
At the end of 2005, forecasters such as the IEA and Energy Information
Administration ("EIA") predicted a growth in global oil consumption in 2006 of
slightly more than 2% or 1.7 mbd, with China and the US as the main drivers. The
EIA predicted oil consumption in the United States to rise by 2.3% and in China
by 7.0%.
The size of the world Suezmax fleet increased by 7.0% in 2005 from 312 vessels
to 334. Two Suezmaxes were scrapped and 24 were delivered during 2005. The total
order book was at 64 at the end of the year which represents 19.2% of the
existing fleet.
The tanker market looks healthy for next year. The freight futures market
appears to be optimistic and it is possible to sell freight futures for the year
2006 at a level that equates to time charter equivalents ("TCEs") for Suezmaxes
at approximately $40,000 per day.
Available Information
We are subject to the informational requirements of the Securities Exchange Act
of 1934, as amended. In accordance with these requirements, we file 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 100 Fifth
Street, N.E., Room 1580 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 facilities
maintained by 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 our principal executive offices at Suite 3218,
One International Place, Boston, Massachusetts, 02110-2624 or at the offices of
our manager at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, Bermuda HM
08.
Item 1A. Risk Factors
Our capitalisation is nominal and we have no source of income other than
payments by the Owners who are foreign corporations as described above. As a
result, we are exposed to risk factors affecting the Owners. The following is a
summary of some of the risks which may adversely affect our business, financial
condition or results of operations. It is not considered possible to quantify
the possible losses to us 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. On April 21,
2005, the Owner of the single hull vessel received irrevocable notice of
Chevron's intention to exercise its first termination option effective April 1,
2006.
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 us on the serial and term loans. Should the Owners
default on payment of this interest and principal, 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
As discussed above, 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 and on April 21, 2005, irrevocable
notice of Chevron's intention to exercise its first termination option on the
single hull vessel Virgo Voyager was received.
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 their
requirements and whether competitive charterhire rates are available in the open
market at that time.
In the event that Chevron does terminate any of the remaining 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 us 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 serial and
term loans. We cannot assure you that the Owner will be able to meet these
obligations upon the 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 us.
Should the Owners default on payment of this interest and principal, 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
As discussed in Item 1, the operation of tanker vessels and transportation of
crude and petroleum products is an extremely competitive business. 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 us. Should the Owners default on payment of this interest and
principal, 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. Compliance with extensive and changing
environmental laws and other regulations may entail significant expenses
including expenses for ship modifications and changes in operating procedures
and therefore affect the operation of the Vessels. Although Chevron is
responsible for all operational matters and bear 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 Organisation, 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 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. 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 us.
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 Chevron Corporation
The Owners are highly dependent on the due performance by Chevron of its
obligations under the Charters and by its guarantor, Chevron Corporation, of its
obligations under its guarantee. A failure by Chevron or Chevron 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
Currently, the Owners must dedicate a large portion of their cash flow from
operations to satisfy their debt service obligations to us. 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 us.
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.
Item 1B. Unresolved Staff Comments
Not applicable
Item 2. Properties
We have 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.
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Approximate
Vessel Construction Registration Delivery Date dwt.
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Cygnus Voyager(1) Double-hull Bahamas March 1993 150,000
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Altair Voyager (2) Double-hull Bahamas August 1993 130,000
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Sirius Voyager (3) Double-hull Bahamas October 1994 150,000
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Virgo Voyager(4) Single-hull Bahamas February 1992 150,000
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(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 which, 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, 2005.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
(a) There is no established trading market for the Common Stock of the
Registrant.
(b) As of February 28, 2006, with respect to the Common Stock, there was one
(1) holder of record of the Registrant's Common Stock.
(c) There were no repurchases of the Common Stock of the Registrant.
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, 2005, 2004 and 2003, and the
balance sheet data as at December 31, 2005 and 2004 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, 2002 and 2001 and the selected balance sheet data as at December
31, 2003, 2002 and 2001 have been derived from audited financial statements of
the Company not included herein.
Year ended December 31,
($'000s except per share data) 2005 2004 2003 2002 2001
Total operating revenues 9,793 10,922 12,450 13,808 15,210
Net income -- -- -- -- --
Net income per share -- -- -- -- --
Dividends per share -- -- -- -- --
Total assets 112,905 127,483 144,090 162,618 181,115
Long term liabilities 98,477 110,533 124,815 141,120 159,280
Cash dividends declared
per share -- -- -- -- --
The following table sets forth a summary of quarterly unaudited results of
operations for the years ended December 31, 2005 and 2004.
First Second Third Fourth
($'000s) Quarter Quarter Quarter Quarter
2005
Net operating revenues 2,643 2,398 2,376 2,376
Expenses 2,643 2,398 2,376 2,376
Net income -- -- -- --
2004
Net operating revenues 2,948 2,683 2,642 2,649
Expenses 2,948 2,683 2,642 2,649
Net income -- -- -- --
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Business Strategy
California Petroleum
We were organised to issue, as agent on behalf of the Owners, the Notes and
subsequently loan the proceeds of the sale to the Owners. Our 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 us
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 we 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 April 21, 2005 irrevocable notice was received regarding Chevron's intent to
exercise its first termination option on the single hull vessel Virgo Voyager.
As of February 28, 2006, notice had not been received from Chevron regarding the
termination of the remaining three Charters.
Liquidity and Capital Resources
We are a passive entity, and our activities are limited to collecting cash from
the Owners and making repayments on the Notes. We have no source of liquidity
and no capital resources other than the cash receipts attributable to the serial
and term loans.
Critical Accounting Policies
Our 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
There were no new accounting standards that would have an impact on our results.
Tabular disclosure of contractual obligations
As at December 31, 2005, we had the following contractual obligations and
commitments:
Payments due by period
Less More
than 1 1-3 3-5 than 5
(in $'000) year years years years Total
Serial Mortgage Notes(7.62%) 2,530 -- -- -- 2,530
Term Mortgage Notes (8.52%) 9,526 21,884 21,884 54,709 108,003
- --------------------------------------------------------------------------------
Total contractual obligations 12,056 21,884 21,884 54,709 110,533
- --------------------------------------------------------------------------------
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
None of the instruments issued by us are for trading purposes. We are exposed to
business risk inherent in the international tanker market as outlined in Risk
Factors.
Quantitative information about the instruments as at December 31, 2005 is as
follows:
Serial Loans
The principal balance of the serial loan made to the Owners will earn interest
at 7.62% and mature on April 1, 2006. The loan is reported net of the related
discounts, which are amortised over the term of the loan.
The outstanding serial loans have the following characteristics:
Maturity date Interest rate Principal due
($ 000)
April 1, 2006 7.62% 2,530
- --------------------------------------------------------------------------------
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 ten-year period
beginning April 1, 2006. The loans are reported net of the related discounts,
which are amortised 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 remaining termination dates.
Scheduled No initial All initial
payment date charters charters
terminated terminated
$'000 $'000
April 1, 2006 9,526 9,526
April 1, 2007 10,942 8,609
April 1, 2008 10,942 5,850
April 1, 2009 10,942 6,350
April 1, 2010 10,942 6,890
April 1, 2011 10,942 7,480
April 1, 2012 10,942 8,110
April 1, 2013 10,942 8,800
April 1, 2014 10,942 9,550
April 1, 2015 10,941 36,838
- --------------------------------------------------------------------------------
108,003 108,003
================================================================================
The outstanding amount of term loans at December 31, 2005 was $108,003,000.
Serial Mortgage Notes
The serial mortgage note bears interest at 7.62% and matures on April 1, 2006.
Interest is payable semi-annually.
The outstanding serial notes have the following characteristics:
Maturity date Interest rate Principal due
($ 000)
April 1, 2006 7.62% 2,530
- --------------------------------------------------------------------------------
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
ten-year sinking fund schedule beginning April 1, 2006. 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
remaining termination dates.
No initial All initial
charters charters
terminated terminated
$'000 $'000
April 1, 2006 9,526 9,526
April 1, 2007 10,942 8,609
April 1, 2008 10,942 5,850
April 1, 2009 10,942 6,350
April 1, 2010 10,942 6,890
April 1, 2011 10,942 7,480
April 1, 2012 10,942 8,110
April 1, 2013 10,942 8,800
April 1, 2014 10,942 9,550
April 1, 2015 10,941 36,838
- --------------------------------------------------------------------------------
108,003 108,003
================================================================================
Item 8. Financial Statements and Supplementary Data
Page
Report of Registered Public Accounting Firm 12
Report of Independent Registered Public Accounting Firm 13
Balance Sheets as of December 31, 2005 and 2004 14
Statements of Operations and Retained Earnings for the Years Ended
December 31, 2005, 2004 and 2003 15
Statements of Cash Flows for the Years Ended December 31, 2005, 16
2004 and 2003
Notes to Financial Statements 17
Report of Registered Public Accounting Firm
To the Board of Directors
California Petroleum Transport Corporation
We have audited the accompanying balance sheets of California Petroleum
Transport Corporation as of December 31, 2005 and 2004 and the related
statements of operations and retained earnings, and cash flows for the years
then ended. 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 audit.
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 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, 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 as of December 31, 2005 and 2004 and the results of its operations
and cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
Grant Thornton LLP
New York, New York
April 7, 2006
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholder
California Petroleum Transport Corporation
We have audited the accompanying statement of operations, cash flows and
retained earnings of California Petroleum Transport Corporation for the year
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 audit.
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. We were not engaged to perform an
audit of the Company's 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 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of California
Petroleum Transport Corporation for the year ended December 31, 2003, in
conformity with United States generally accepted accounting principles.
Ernst & Young
Chartered Accountants
Douglas, Isle of Man
April 13, 2004
California Petroleum Transport Corporation
Balance Sheets as of December 31, 2005 and 2004
(in thousands of US$)
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 22 32
- --------------------------------------------------------------------------------
Total current assets 14,428 16,950
Serial loans receivable, less current portion -- 2,528
Term loans receivable, less current portion 97,659 107,097
Deferred charges and other long-term assets 818 908
- --------------------------------------------------------------------------------
Total assets 112,905 127,483
================================================================================
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 22 32
- --------------------------------------------------------------------------------
Total current liabilities 14,427 16,949
Serial mortgage notes, less current portion -- 2,530
Term mortgage notes, less current portion 98,477 108,003
- --------------------------------------------------------------------------------
Total liabilities 112,904 127,482
Stockholder's equity
Common stock, $1 par value; 1,000 shares
authorised, issued and outstanding 1 1
- --------------------------------------------------------------------------------
Total liabilities and stockholder's equity 112,905 127,483
================================================================================
See accompanying Notes to the Financial Statements
California Petroleum Transport Corporation
Statements of Operations and Retained Earnings for the years ended December 31,
2005, 2004 and 2003 (in thousands of US$)
2005 2004 2003
Revenue
Interest income 9,771 10,865 12,369
Expenses reimbursed 22 57 81
- -------------------------------------------------------------------------------
Total operating revenues 9,793 10,922 12,450
- -------------------------------------------------------------------------------
Expenses
General and administrative expenses (22) (57) (81)
Amortisation of debt issue costs (90) (256) (256)
Interest expense (9,681) (10,609) (12,113)
- -------------------------------------------------------------------------------
(9,793) (10,922) (12,450)
- -------------------------------------------------------------------------------
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, 2005, 2004 and 2003
(in thousands of US$)
2005 2004 2003
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 90 256 256
Changes in operating assets and liabilities:
Interest receivable 286 309 378
Other current assets 10 (7) (10)
Accrued interest (286) (309) (378)
Other current liabilities (10) 7 10
- -----------------------------------------------------------------------------------
Net cash provided by operating activities 90 256 256
- -----------------------------------------------------------------------------------
Cash flows from investing activities
Collections on loans receivable 14,192 16,049 17,904
- -----------------------------------------------------------------------------------
Net cash provided by investing activities 14,192 16,049 17,904
- -----------------------------------------------------------------------------------
Cash flows from financing activities
Repayments of mortgage notes (14,282) (16,305) (18,160)
- -----------------------------------------------------------------------------------
Net cash used in financing activities (14,282) (16,305) (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 9,968 11,173 12,492
===================================================================================
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 was organised
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
("Chevron").
The Owners have chartered the Vessels to Chevron under bareboat charters that
are expected to provide sufficient payments to cover the Owners' obligations to
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.
On April 21, 2005, pursuant to Clause 2 (a) (ii) of the bareboat charter dated
April 5, 1995 between CalPetro Tankers (Bahamas III) Limited ( the "Owner") and
Chevron Transport Corporation Ltd ("Chevron"), the Owner received irrevocable
notice from Chevron regarding the termination of the bareboat charter of the
vessel Virgo Voyager on April 1, 2006. As the appointed manager to the Owner,
Frontline Ltd (the "Manager"), will attempt to arrange for an acceptable
replacement charter.
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (US 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 capitalisation of debt issue costs. These
costs are amortised 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 balance of the Serial Loan earns interest at 7.62% and
matures on April 1, 2006. The loans are reported net of the related
discounts, which are amortised over the term of the loans.
4. TERM LOANS
The principal balances of the Term Loans earn interest at a rate of 8.52%
per annum and are to be repaid over a remaining ten-year period beginning
April 1, 2006. The loans are reported net of the related discounts, which
are amortised over the term of the loans.
5. SERIAL LOANS AND TERM LOANS COLLATERAL
The Serial and Term Loans are collateralised by first 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
Chevron Corporation) relating to the Vessels have been collaterally
assigned pursuant to the assignment of initial charter and assignment of
initial charter guarantee to the Company, which in turn has assigned such
assignments to the collateral trustee. The Capital stock of each of the
Owners has been pledged to the Company pursuant to stock pledge agreements.
6. DEFERRED CHARGES
Deferred charges represent the capitalisation of debt issue costs. These
costs are amortised over the term of the Notes to which they relate. The
deferred charges are comprised of the following amounts:
(in thousands of $) 2005 2004
Debt arrangement fees 3,400 3,400
Accumulated amortisation (2,582) (2,492)
--------------------------------------------------------------------------
818 908
==========================================================================
7. DEBT
(in thousands of $) 2005
7.62% Serial Mortgage Notes due 2006 2,530
8.52% Term Mortgage Notes due 2015 108,003
--------------------------------------------------------------------------
Total debt 110,533
Less: short-term portion (12,056)
--------------------------------------------------------------------------
98,477
==========================================================================
The outstanding debt as of December 31, 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 10,942
2011 and later 54,709
--------------------------------------------------------------------------
Total debt 110,533
==========================================================================
The serial mortgage note bears interest at 7.62% and matures 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 December 31, 2005 and
2004, 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 ten-year sinking fund schedule beginning April 1, 2006. 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, 2005 and 2004, the Company was
in compliance with these covenants.
As of December 31, 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,
2005, to and including April 1, 2015, 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
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
2011 and 54,709 31,122 39,656 18,784 34,798 15,930 14,922
later
- ---------------------------------------------------------------------------------------------------------
108,003 44,609 63,394 31,865 63,394 31,865 29,842
=========================================================================================================
8. SHARE CAPITAL
2005 2004
Authorised and issued share capital:
1,000 shares of $1.00 each (2003: 1,000
shares of $1.00 each) 1,000 1,000
Fully paid share capital:
NIL (2003: NIL) -- --
9. FINANCIAL INSTRUMENTS
Fair values
The carrying value and estimated fair value of the Company's financial
instruments at December 31, 2005 and 2004 are as follows:
2005 2005 2004 2004
Fair Carrying Fair Carrying
(in thousands of $) Value Value Value Value
Non-Derivatives:
Cash and cash equivalents 1 1 1 1
Serial Mortgage Notes 7.62% maturing through 2,530 2,530 10,448 10,270
2006
8.52% Term Mortgage Notes due 2015 120,963 108,003 131,297 114,545
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.
10. SUBSEQUENT EVENTS
On March 31, 2006, Frontline announced that an acceptable replacement
charter had been negotiated with one of its wholly owned subsidiaries
replacing Chevron as the bareboat charterer with effect from April 1, 2006.
The charter will follow the existing contract with the hire for the two
year period from to March 31, 2008 being prepaid on April 1, 2006. The new
charter will contain seven annual options to extend the charter and will
provide sufficient funds to honour the mandatory sinking fund payments and
all related expenses .
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
N/A
Item 9a. Controls and Procedures
The Company's management, including the Company's President and Treasurer, with
the participation of the Company's manager, Frontline Ltd, has evaluated the
effectiveness of the Company's disclosure controls and procedures as of December
31, 2005. 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, 2005.
Changes in Internal Controls
There were no material changes in the Company's internal control over financial
reporting during the fourth quarter of 2005.
Item 9b. Other Information
None
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 Company
Nancy I. DePasquale 38 Director and President
Geraldine St-Louis 30 Vice President
Louise E. Colby 57 Director and Assistant Secretary
R. Douglas Donaldson 64 Treasurer
Blake W. Grosch 25 Secretary
Officers are appointed by the Board of Directors and will serve until they
resign or are removed by the Board of Directors.
Nancy 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 and
Related Stockholder Matters
The following table provides information as of February 28, 2006 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 February 28,
2006.
Beneficial Ownership
Class of shares Name and address of beneficial owners Number of shares Percent 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
N/A
Item 14. Principal Accountant Fees and Services
We have engaged Grant Thornton as our principal accountant. The following table
summarises fees we have paid Grant Thornton for independent auditing, tax and
related services for each of the last two fiscal years:
2005 2004
Audit fees (1) 15,500 15,000
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, 2005 and 2004
Statements of Operations and Retained Earnings for the Years Ended December 31,
2005, 2004 and 2003
Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003
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 authorised.
California Petroleum Transport Corporation
------------------------------------------
(Registrant)
Date April 13, 2006 By
----------------------------------------
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 13, 2006 By
----------------------------------------
Nancy I. DePasquale
Director and President
Date April 13, 2006 By
----------------------------------------
R. Douglas Donaldson
Treasurer