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 March 31, 2006
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Or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________________ to ____________________
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 04-323976
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 3218, One International Place, Boston, Massachusetts 02110-2624
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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 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
Number of shares outstanding of each class of Registrant's Common Stock as of
April 18, 2006
Common, $1.00 par value ............................................1,000 shares
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Three month period ended March 31, 2006
ITEM PAGE
Part I Financial Information
Item 1 Financial Statements
Unaudited Statements of Operations and Retained Earnings for
the Three Month Periods Ended March 31, 2006 and 2005 1
Unaudited Balance Sheets as of March 31, 2006 and December 31,
2005 2
Unaudited Statements of Cash Flows for the Three Month
Periods Ended March 31, 2006 and 3 2005 Unaudited Notes to the
Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
Item 3 Quantitative and Qualitative Disclosures about Market Risk 6
Item 4 Controls and Procedures 8
Part II Other Information
Item 5 Other Information 8
Item 6 Exhibits 8
Signatures 9
Omitted items are not applicable
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
California Petroleum Transport Corporation
Statements of Operations and Retained Earnings for the Three Month Periods ended
March 31, 2006 and 2005 (Unaudited)
(in thousands of US$)
3 month period ended
March 31,
2006 2005
Revenue
Interest income 2,371 2,635
Fees reimbursed by related parties 19 8
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Net operating revenues 2,390 2,643
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Expenses
General and administrative expenses (19) (8)
Amortisation of debt issue costs (22) (64)
Interest expense (2,349) (2,571)
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(2,390) (2,643)
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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
California Petroleum Transport Corporation
Balance Sheets as of March 31, 2006 and December 31, 2005
(Unaudited)
(in thousands of US$)
March 31, December 31,
2005 2006
ASSETS
Current assets:
Cash and cash equivalents 1 1
Current portion of serial loans receivable 2,530 2,530
Current portion of term loans receivable 9,526 9,526
Interest receivable 4,697 2,349
Other current assets 41 22
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Total current assets 16,795 14,428
Term loans receivable, less current portion 97,681 97,659
Deferred charges and other long-term assets 796 818
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Total assets 115,272 112,905
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LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accrued interest 4,697 2,349
Current portion of serial mortgage notes 2,530 2,530
Current portion of term mortgage notes 9,526 9,526
Other current liabilities 41 22
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Total current liabilities 16,794 14,427
Term mortgage notes, less current portion 98,477 98,477
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Total liabilities 115,271 112,904
Stockholder's equity
Common stock, $1 par value; 1,000 shares 1 1
authorised, issued and outstanding
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Total liabilities and stockholder's equity 115,272 112,905
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See notes to the financial statements
California Petroleum Transport Corporation
Statements of Cash Flows for the Three Month Periods Ended March 31, 2006 and
2005 (Unaudited)
(in thousands of US$)
3 month period ended
March 31,
2006 2005
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 22 64
Amortisation of issue discount on loan receivable (22) (64)
Changes in operating assets and liabilities:
Interest receivable (2,348) (2,635)
Other current assets (19) (23)
Accrued interest 2,348 2,635
Other current liabilities 19 23
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Net cash provided by operating activities -- --
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Cash flows from investing activities
Collections on loans receivable -- --
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Net cash provided by investing activities -- --
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Cash flows from financing activities
Repayments of mortgage notes -- --
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Net cash used in financing activities -- --
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Net change 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 -- --
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See notes to the 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.
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.
Basis of Presentation
The accompanying unaudited condensed 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 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 as of December 31, 2005 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by 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, 2005.
2. PRINCIPAL ACCOUNTING POLICIES
(a) Revenue and expense recognition
Interest receivable on the Serial and Term Loans is accrued on a daily
basis. Interest payable on the Serial and 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 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. LOANS RECEIVABLE
The principal balance of the Serial Loans 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. 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.
4. 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 JPMorgan Chase Bank 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.
5. 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 $) March 31, 2006 December 31, 2005
Debt arrangement fees 3,400 3,400
Accumulated amortisation (2,604) (2,582)
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796 818
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6. SUBSEQUENT EVENTS
On March 31, 2006, Frontline announced that an acceptable replacement
charter had been negotiated for the Virgo Voyager 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 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 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Organisation and History
California Petroleum Transport Corporation (the "Company") was incorporated
under the laws of the state of Delaware on May 18, 1994. We are a special
purpose corporation that was organised 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
Interest income and expense has decreased in the three month period ended March
31, 2006 compared to the same period in 2005. The decrease is in line with
expectations as a result of the decrease in the principal balance of the Notes
and Loans. Amortisation of debt issue costs has decreased in the three month
period ended March 31, 2006 as a result of debt issue costs relating to the
Serial Mortgage Notes being fully amortised as maturity of the Notes approaches.
Administrative expenses and fees reimbursed by related parties have increased
reflecting the increased administrative costs of operation.
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 Loans.
Off-balance Sheet Arrangements
We have 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 2005
Form 10-K.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(a) Quantitative information about market risk
Quantitative information about market risk instruments as of March 31, 2006
is as follows:
(in thousands of $)
Serial Mortgage Notes (7.62%) maturing 2006 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 March 31, 2006 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
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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 with interest being 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. As of March 31,
2006, we were in compliance with these covenants.
The Term Mortgage Notes bear interest at a rate of 8.52% per annum with
principal being repayable in accordance with a remaining ten-year sinking
fund schedule beginning April 1, 2006 and interest being payable
semi-annually. The Term Mortgage Notes include certain covenants such as
restriction on the payment of dividends and the making additional loans or
advances to affiliates. As of March 31, 2006, we were in compliance with
these covenants.
As of March 31, 2006, the effective interest rate for the Notes was 8.50%.
The Term Mortgage Notes are subject to redemption through the operation of
a mandatory sinking fund on April 1 of each year, commencing on April 1,
2004 up 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 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 following termination of the related
charters on each of the optional termination dates.
(in thousands of $)
Scheduled Charter not 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 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
We were organised solely for the purpose of issuing, as agent on behalf of
the Owners, the Term Mortgage Notes and Serial Mortgage Notes as
obligations of ours and loaning the proceeds of the sale to the Owners to
facilitate the funding of the acquisition of the Vessels from Chevron.
ITEM 4 - CONTROLS AND PROCEDURES
(a) Evaluation of disclosure 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 March 31, 2006. Based on that evaluation, the Company's
President and Treasurer concluded that the Company's disclosure controls
and procedures were effective as of March 31, 2006.
(b) Changes in internal controls
There were no material changes in the Company's internal control over
financial reporting during the first quarter of 2006.
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION
As disclosed in a Form 8-K filed April 4, 2006 and as discussed in Note 6 to the
financial statements included herein, on March 31, 2006, Frontline announced
that an acceptable replacement charter for the Virgo Voyager 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 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 6 - 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
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* Filed herewith.
**Furnished herewith.
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 authorised.
California Petroleum Transport Corporation
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(Registrant)
Date May 15, 2006 By /s/ Nancy I. DePasquale
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Nancy I. DePasquale
Director and President
Date May 15, 2006 By /s/ R. Douglas Donaldson
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R. Douglas Donaldson
Treasurer and Principal Financial Officer
SK 02089 0006 668681