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 September 30, 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
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Commission File Number: 033-79220
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California Petroleum Transport Corporation
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(Exact name of registrant as specified in its charter)
Delaware 04-323976
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
Suite 3218, One International Place, Boston, Massachusetts 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
November 9, 2006
Common, $1.00 par value .......................................1,000 shares
California Petroleum Transport Corporation
Quarterly Report on Form 10-Q
Nine month period ended September 30, 2006
ITEM PAGE
Part I Financial Information
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Item 1 Financial Statements
Unaudited Balance Sheets as of September 30, 2006
and December 31, 2005 1
Unaudited Statements of Operations and Retained Earnings
for the Three and Nine Month Periods Ended
September 30, 2006 and 2005 2
Unaudited Statements of Cash Flows for the Nine Month
Periods Ended September 30, 2006 and 2005 3
Unaudited Notes to the Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 3 Quantitative and Qualitative Disclosures about Market Risk 7
Item 4 Controls and Procedures 8
Part II Other Information
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Item 1 Legal Proceedings 9
Item 1A Risk Factors 9
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 9
Item 3 Defaults Upon Senior Securities 9
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 5 Other Information 9
Item 6 Exhibits 9
Signatures 10
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
California Petroleum Transport Corporation
Balance Sheets as of September 30, 2006 and December 31, 2005
(Unaudited)
(in thousands of US$)
September 30, December 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents 1 1
Current portion of serial loans - 2,530
receivable
Current portion of term loans receivable 10,096 9,526
Interest receivable 4,195 2,349
Other current assets 28 22
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Total current assets 14,320 14,428
Term loans receivable, less current portion 87,629 97,659
Deferred charges and other long-term assets 752 818
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Total assets 102,701 112,905
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LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accrued interest 4,195 2,349
Current portion of serial mortgage notes - 2,530
Current portion of term mortgage notes 10,096 9,526
Other current liabilities 28 22
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Total current liabilities 14,319 14,427
Term mortgage notes, less current 88,381 98,477
portion
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Total liabilities 102,700 112,904
Stockholder's equity
Common stock, $1 par value; 1,000 1 1
shares authorised, issued and
outstanding
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Total liabilities and stockholder's equity 102,701 112,905
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See notes to the financial statements
California Petroleum Transport Corporation
Statements of Operations and Retained Earnings for the Three and
Nine Month Periods ended September 30, 2006 and 2005
(Unaudited)
(in thousands of US$)
Three month period Nine month period
ended September 30, ended
September 30,
2006 2005 2006 2005
Revenue
Interest income 2,120 2,370 6,610 7,400
Fees reimbursed by related parties (22) 6 20 17
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Net operating revenues 2,098 2,376 6,630 7,417
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Expenses
General and administrative expenses 22 (6) (20) (17)
Amortisation of debt issue costs (22) (22) (66) (68)
Interest expense (2,098) (2,348) (6,544) (7,332)
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(2,098) (2,376) (6,630) (7,417)
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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
Statements of Cash Flows for the Nine Month Periods Ended September 30, 2006 and
2005
(Unaudited)
(in thousands of US$)
Nine month period ended
September 30,
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 66 68
Amortisation of issue discount on loan receivable (66) (68)
Changes in operating assets and liabilities:
Interest receivable 1,846 (2,062)
Other current assets 6 15
Accrued interest (1,846) 2,062
Other current liabilities (6) (15)
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Net cash provided by operating activities - -
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Cash flows from investing activities
Collections on loans receivable 12,056 14,282
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Net cash provided by investing activities 12,056 14,282
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Cash flows from financing activities
Repayments of mortgage notes (12,056) (14,282)
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Net cash used in financing activities (12,056) (14,282)
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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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See notes to the financial statements
California Petroleum Transport Corporation
Unaudited 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 originally chartered four vessels to Chevron and currently
charter three 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.
In accordance with the initial charter, on April 21, 2005, one of the
Owners received irrevocable notice from Chevron regarding the termination
of the bareboat charter of the vessel Virgo Voyager on April 1, 2006. On
April 1, 2006, the Virgo Voyager was redelivered to the Owner and
immediately delivered to Front Voyager Inc, a wholly owned subsidiary of
Frontline Ltd, the Owner's ultimate parent, for an initial two year period
under a bareboat charter that provides for charterhire of $5.05 million for
the two years ended April 1, 2008. 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 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 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 balances of the Term Loans earn interest at a rate of 8.52%
per annum and are to be repaid over a remaining nine-year period beginning
April 1, 2007. 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 (whereby 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 $) September 30, 2006 December 31, 2005
Debt arrangement fees 3,400 3,400
Accumulated amortisation (2,648) (2,582)
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752 818
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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. The Company is 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
Three and nine months ended September 30, 2006 compared with the three and nine
months ended September 30, 2005
Amounts included in the following discussion are derived from our unaudited
interim financial statements as at and for the nine months ended September 30,
2006 and 2005.
Interest income
(in thousands of $) Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
Interest income 2,120 2,370 6,610 7,400
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Interest income has decreased in the three and nine months ended September 30,
2006 compared to the same periods in 2005 primarily due to a decrease in the
principal balance of loans receivable. On April 1, 2006, the Owners repaid a
total principal of $12.1 million on the Loans. As of September 30, 2006, the
Serial Loans were fully paid.
Administrative expenses
(in thousands of $) Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
Administrative expenses (22) 6 20 17
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Administrative expenses have decreased in the three months ended September 30,
2006 compared to the same period in 2005 as a result of the release of the over-
accrual of fees in the second quarter of 2006. Administrative expenses for the
nine months ended September 30, 2006 are marginally higher than the expense for
the corresponding period in 2005 as a result of increased audit fees.
Interest expense
(in thousands of $) Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
Interest expense 2,120 2,370 6,610 7,400
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Interest expense has decreased in the three and nine months ended September 30,
2006 compared to the same periods in 2005 primarily due to a decrease in the
principal balance of the Notes. On April 1, 2006, we repaid a total principal of
$12.1 million on the Notes. As of September 30, 2006, the Serial Notes were
fully paid.
Fees reimbursed by related parties
(in thousands of $) Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
Fees reimbursed by related parties (22) 6 20 17
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General and administrative expenses comprising trustee fees, audit fees and
other costs incurred by us are billed to the Owners. Refer to the discussion
above on administrative expenses.
Liquidity and Capital Resources
The Company is a passive entity, and its activities are limited to collecting
cash from the Owners and making repayments on the Notes. The Company has no
source of liquidity and no capital resources other than the cash receipts
attributable to the Loans.
Off-balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have, or are reasonably
likely to have, a material current effect or that are reasonably likely to have
a material future effect on its financial condition, revenues or expenses,
liquidity, capital expenditures or capital reserves.
Critical Accounting Policies
There have been no material changes to the Company's 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 its 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 September 30,
2006 is as follows:
(in thousands of $)
8.52% Term Mortgage Notes due 2015 98,477
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Total debt 98,477
Less: short-term portion 10,096
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88,381
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The outstanding debt as of September 30, 2006 is repayable as follows:
(in thousands of $)
Year ending December 31,
2007 10,096
2008 10,146
2009 10,196
2010 10,256
2011 10,316
2012 and later 47,467
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Total debt 98,477
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The Term Mortgage Notes bear interest at a rate of 8.52% per annum with
principal being repayable in accordance with a remaining nine-year sinking
fund schedule beginning April 1, 2007 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 September 30, 2006, the Company was in
compliance with these covenants.
As of September 30, 2006, the effective interest rate for the Term Mortgage
Notes was 8.52%.
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, 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 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 Charter Charter Charter Charter Charter Charter
payment date not terminated terminated terminated terminated terminated terminated
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
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108,003 44,609 63,394 31,865 63,394 31,865 29,842
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(b) Qualitative information about market risk
The Company was 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
Transport Corporation.
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 September 30, 2006. Based on that evaluation, the
Company's President and Treasurer concluded that the Company's disclosure
controls and procedures were effective as of September 30, 2006.
(b) Changes in internal controls
There were no material changes in the Company's internal control over
financial reporting during the third quarter of 2006.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Not Applicable
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
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 November 9, 2006 By /s/ Nancy I. DePasquale
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Nancy I. DePasquale
Director and President
Date November 9, 2006 By /s/ R. Douglas Donaldson
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R. Douglas Donaldson
Treasurer and Principal Financial Officer
SK 02089 0006 721196