CALIFORNIA PETROLEUM TRANSPORT CORPORATION
ANNUAL REPORT
For year ended
December 31, 1998
on Form 10-K SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1998
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: 33-79220
33-56377
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
(Exact name of Registrant as specified in its charter)
State of Delaware 04-3232976
_______________________ _______________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Room 6/9 One International Place
Boston, Massachusetts, 02101
(Address of principal executive offices) 02110-2624
(Zip Code)
Registrant's telephone number, including area code:
(617) 951-7727
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
NONE
___________________________
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes _X___ No ____
Documents Incorporation by Reference:
The following documents filed pursuant to Rule 424(b) under the
Securities Act of 1933, as amended, are incorporated by reference
into Part I of this Form 10-K.
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
FORM 10-K
TABLE OF CONTENTS
Page
PART I
Item 1. Business..........................................1
Item 2. Properties........................................2
Item 3. Legal Proceedings.................................2
Item 4. Submission of Matters to a Vote of
Security Holders..................................3
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters...................3
Item 6. Selected Financial Data...........................3
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................................5
Item 7(a) Quantitative and Qualitative
disclosures about Market Risk ....................6
Item 8. Financial Statements and Supplementary
Data.............................................10
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure.......................................17
PART III
Item 10. Directors and Officers of the
Registrant.......................................17
Item 11. Executive Compensation.......................... 17
Item 12. Security Ownership of Certain
Beneficial Owners and Management................ 17
Item 13. Certain Relationships and Related
Transactions.....................................18
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K..........................18
PART I
ITEM 1. BUSINESS
THE COMPANY
California Petroleum Transport Corporation, a Delaware
corporation ("California Petroleum"), is a special purpose
corporation that was organized solely for the purpose of issuing,
as agent on behalf of the Owners (as defined), 8.52% term
mortgage notes due 2015 and serial mortgage notes due between
2004 and 2015, (together the "Notes") as obligations of
California Petroleum and loaning the proceeds of the sale of the
Notes to the Owners to facilitate the funding of the acquisition
of the four vessels (the "Vessels") described below from Chevron
Transport Corporation (the "Initial Charterer"). All the shares
of California Petroleum are held by The California Trust, a
Massachusetts charitable lead trust formed by JH Holdings, a
Massachusetts corporation, for the benefit of certain charitable
institutions in Massachusetts.
THE OWNERS
Each of CalPetro Tankers (Bahamas I) Limited ("CalPetro Bahamas
I"), CalPetro Tankers (Bahamas II) Limited ("Calpetro Bahamas
II") and CalPetro Tankers (Bahamas III) Limited ("CalPetro
Bahamas III"), was organized as a special purpose company under
the laws of the Bahamas for the purpose of acquiring and
chartering out one of the Vessels. Similarly, CalPetro Tankers
(IOM) Limited ("CalPetro IOM") has been organized as a special
purpose company under the laws of the Isle of Man for the purpose
of acquiring and chartering out one of the Vessels. Each of the
foregoing companies also is referred to in this document as an
"Owner". Each Owner, either pursuant to the terms of its
Memorandum of Association and/or pursuant to the terms of the
related mortgage, will engage in no business other than the
ownership and chartering of its Vessel and activities resulting
from or incidental to such ownership and chartering. Each Owner
is wholly owned by California Tankers Investments Limited, a
company organized under the laws of the Bahamas, which is a
wholly owned subsidiary of CalPetro Holdings Limited, an Isle of
Man company. None of the Owners is owned by or is an affiliate
of California Petroleum and neither of California Petroleum nor
any Owner is owned by or is an affiliate of the Initial
Charterer.
THE CHARTERS
Each of the Vessels is currently chartered to the Initial
Charterer pursuant to a charter dated as of the date of the
original issuance of the notes (collectively, the "Charters") and
1
which is due to expire on April 1, 2015. Upon payment of a
termination amount, the Initial Charterer has the right to
terminate the charters on any four (in the case of the double-
hulled Vessels) or three (in the case of the single-hulled
Vessel), termination dates which, for each Vessel, occur at two-
year intervals beginning in 2003, 2004, 2005 or 2006, as the case
may be.
THE INTERNATIONAL TANKER MARKET
International seaborne oil and petroleum products transportation
services are mainly provided by two types of operator: major oil
company captive fleets (both private and state-owned) and
independent shipowner fleets. Both types of operators transport
oil under short-term contracts (including single-voyage "spot
charters") and longer-term time charters with oil companies, oil
traders, large oil consumers, petroleum product producers and
government agencies. The oil companies own, or control through
long-term time charters, approximately one third of the current
world tanker capacity, while independent shipowners own or
control the balance of the fleet. The oil companies use their
fleets not only to transport their own oil, but also to transport
oil for third-party charterers in direct competition with
independent owners and operators in the tanker charter market.
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.
THE INTERNATIONAL TANKER MARKET CONTINUED
In order to benefit from economies of scale, tanker charterers
will typically charter the largest possible vessel to transport
oil or products, consistent with port and canal dimensional
restrictions and optimal cargo lot sizes. The oil tanker fleet
is generally divided into the following five major types of
vessels, based on vessel carrying capacity: (i) ULCC-size range
of approximately 320,000 to 450,000 deadweight tonnes ("dwt");
(ii) VLCC-size range of approximately 200,000 to 320,000 dwt;
(iii) Suezmax-size range of approximately 120,000 to 200,000 dwt;
(iv) Aframax-size range of approximately 60,000 to 120,000 dwt;
and (v) small tankers of less than approximately 60,000 dwt.
ULCCs and VLCCs typically transport crude oil in long-haul
trades, such as from the Arabian Gulf to Rotterdam via the Cape
of Good Hope. Suezmax-size tankers also engage in long-haul
2
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 charterhire rates are strongly influenced
by the supply and demand for shipping capacity. The tanker
market in general has been depressed for a number of years,
largely as a result of an excess of tonnage supply over demand.
In 1998, the Suezmax sector of the tanker market continued to
fluctuate and some reductions came as a result of lower oil
demand from Asian economies. There is no guarantee that Suezmax
rates would be sufficient to meet the debt service required if
the bareboat charters entered into with Chevron are not extended.
ITEM 2. PROPERTIES
The Owners paid approximately $80.7 million for each double-
hulled Vessel and $40.0 million for the single-hulled Vessel.
DELIVERY APPROXIMATE
VESSEL CONSTRUCTION REGISTRATION DATE DWT
Samuel Ginn Double Hull Bahamas March 1993 150,000
Condoleezza Rice Double Hull Bahamas August 1993 130,000
Chevron Mariner Double Hull Liberia October 1994 150,000
William E. Crain Single Hull Liberia February 1992 150,000
ITEM 3. LEGAL PROCEEDINGS
Neither California Petroleum nor the Owners are parties to any
legal proceedings, nor are there any legal proceedings threatened
against any of California Petroleum or the Owners, which in
either case are material to California Petroleum's assets or
business.
3
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fiscal year ended December 31, 1998.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) There is no established trading market for the Common Stock
of the Registrant.
(b) As of March 12, 1999 with respect to the Common Stock there
was one (1) holder of record of the Registrant's Common
Stock.
ITEM 6. SELECTED FINANCIAL DATA
The following selected historical financial and other data for
Californian Petroleum was derived from more detailed information
and financial statements and notes thereto appearing elsewhere in
this Annual Report and should be read in conjunction therewith.
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
INCOME STATEMENT DATA
(US Dollars in thousands) Period
Year ended April 1, to
December 31, December 31,
1998 1997 1996 1995
INCOME
Interest income 19,130 20,421 21,659 16,640
Recovery of general and
administrative expenses 61 64 64 47
_______ _________ _________ _________
19,191 20,485 21,723 16,687
EXPENSES
Interest payable (18,874) (20,165) (21,403) (16,452)
4
General and administrative
expenses (61) (64) (64) (47)
Amortization of debt
issue costs (256) (256) (256) (188)
_______ _________ _________ _________
NET INCOME Nil Nil Nil Nil
======= ========= ========= =========
5
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
BALANCE SHEET DATA
December 31,
(US Dollars in thousands) 1998 1997 1996 1995
ASSETS
Current assets:
Cash and cash equivalents 1 1 1 1
Current portion of serial loan 18,160 18,160 18,160 17,160
Interest receivable 4,637 4,962 5,279 5,566
Other assets 6 28 6 8
_______ _________ _________ _________
TOTAL CURRENT ASSETS 22,804 23,151 23,446 22,735
Serial loans receivable less
current portion 94,850 112,842 130,834 148,826
Terms loans receivable 116,466 116,378 116,290 116,202
Deferred charges and other
assets 2,444 2,700 2,956 3,212
________ __________ __________ __________
TOTAL ASSETS 236,564 255,071 273,526 290,275
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Interest accrued 4,637 4,962 5,279 5,566
Current portion of serial
mortgage notes 18,160 18,160 18,160 17,160
Other liabilities 6 28 6 8
_______ _________ _________ _________
TOTAL CURRENT LIABILITIES 22,803 23,150 23,445 22,734
Serial mortgage notes 95,860 114,020 132,180 150,340
Term mortgage notes 117,900 117,900 117,900 117,900
________ __________ __________ __________
TOTAL LIABILITIES 236,563 255,070 273,525 290,274
6
________ __________ __________ __________
Shareholders' equity 1 1 1 1
____ ____ ____ ____
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 236,564 255,071 273,526 290,275
======== ======== ======== ========
7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
i) California Petroleum
California Petroleum's sole business has been to issue, as agent
on behalf of the Owners, the Notes and to loan to the Owners the
proceeds of the sale of the Notes. California Petroleum's only
sources of funds with respect to the Notes are payments of
interest and principal on related loans from California Petroleum
to each Owner. General and administrative expenses comprising
trustee fees, legal fees, agency fees and other costs incurred by
California Petroleum are billed to the Owners. California
Petroleum has no source of income other than payments to it by
the Owners. The net result for the year is neither a gain nor a
loss; the detail relating to such result is set forth on page 11
Statement of Income.
ii) Owners
The Owners' strategy has been to acquire the Vessels and charter
them to the Initial Charterer under bareboat charters which are
expected to provide (a) charterhire payments which the Issuer and
the Owners expect will be sufficient to pay, so long as the
Initial 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 Initial 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 Initial Charters; and to arrange for vessel
management and remarketing services to be available in case any
Initial Charter is terminated by the Initial Charterer or any
Vessel is for any other reason returned to the possession and use
of the Owners.
YEAR 2000
The Vessels are provided with computers and have computerized
control systems. Further the Vessels have equipment such as for
example navigational aids, communications systems, machinery
equipment, cargo measuring equipment and alarm systems that rely
on computers or embedded computer chips for proper function.
8
The initial terms of the Charters extend beyond the year 2000.
The Initial Charterer has assured the Company that it is very
aware of the year 2000 problem. The Initial Charterer has
confirmed that in the dealings with the Vessels it is taking, and
will continue to take, all reasonable steps to allow business
continuity into the year 2000 and beyond.
The Initial Charterer's obligation to pay charter hire is
absolute, including in circumstances where a Vessel should be
unfit for use due to computer related problems, should such occur
in spite of the Initial Charterer's diligent approach to the
preparations for the year 2000. In addition, the Initial
Charterer is obliged to indemnify the relevant Owner and the
Company in respect of events arising through the term of the
Charters with respect to, among other things, all liabilities
claims and proceedings arising in any manner out of the operation
of the Vessels by the Initial Charterer with no exclusion of
events relating to computers or problems that could affect
computers at certain dates. The Initial Charterer's obligations
as described above are guaranteed by the Chevron Guarantees.
California Petroleum and the Owners rely on banks for their
payments and on general communication equipment. California
Petroleum and the Owners will only rely on internationally
recognized commercial banks and communication companies for
providing such services. The Owners rely on services provided by
the Manager for their administration and management. The Manager
provides these services at a fixed price. The Manager has assured
the Owners that it shall be able to provide such services without
date related interruptions. Accordingly, the Owners do not expect
to incur any year 2000 related expenses.
ITEM 7 (A) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
(a) QUANTITATIVE INFORMATION ABOUT MARKET RISK
Quantitative information about market risk instruments
at December 31, 1998 is as follows:
i) SERIAL LOANS
The principal balances of the Serial Loans earn
interest at rates ranging from 7.30% to 7.62% and
mature over a eight year period beginning April 1,
1999. The loans are reported net of the related
discounts, which are amortized over the term of the
loans.
9
The outstanding serial loans have the following
characteristics:
Principal Interest Maturity
due rate date
$ 000
18,160 7.30% April 1, 1999
18,160 7.35% April 1, 2000
18,160 7.44% April 1, 2001
18,160 7.49% April 1, 2002
18,160 7.55% April 1, 2003
12,950 7.57% April 1, 2004
7,740 7.60% April 1, 2005
2,530 7.62% April 1, 2006
_______
114,020
_______
10
ITEM 7 (a) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
(a) QUANTITATIVE INFORMATION ABOUT MARKET RISK (CONTINUED)
ii) 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
twelve-year period beginning nine years from April 1,
1995. The loans are reported net of the related
discounts, which are amortized over the term of the
loans.
The table below provides the final principal payments on
the Term Loans if none of the Initial Charters is
terminated and if all of the Initial Charters are
terminated on the earliest termination dates.
Scheduled No Initial All Initial
Payment date Charters Charters
Terminated Terminated
$ 000 $ 000
April 1, 2004 3,355 1,700
April 1, 2005 6,542 3,480
April 1, 2006 9,526 5,320
April 1, 2007 10,942 6,340
April 1, 2008 10,942 6,880
April 1, 2009 10,942 7,470
April 1, 2010 10,942 8,110
April 1, 2011 10,942 8,800
April 1, 2012 10,942 9,540
April 1, 2013 10,942 10,360
April 1, 2014 10,942 11,240
April 1, 2015 10,941 38,660
_______ _______
117,900 117,900
_______ _______
11
ITEM 7 (a) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
(a) QUANTITATIVE INFORMATION ABOUT MARKET RISK (CONTINUED)
iii) SERIAL MORTGAGE NOTES
The Serial Mortgage Notes bear interest at rates ranging
from 7.30% to 7.62% through maturity. The Notes mature
over an eight-year period beginning one year from April
1, 1999. Interest is payable semi-annually.
The outstanding serial loans have the following
characteristics:
Principal due Interest Rate Maturity Date
on maturity
$ 000
18,160 7.30% April 1, 1999
18,160 7.35% April 1, 2000
18,160 7.44% April 1, 2001
18,160 7.49% April 1, 2002
18,160 7.55% April 1, 2003
12,950 7.57% April 1, 2004
7,740 7.60% April 1, 2005
2,530 7.62% April 1, 2006
________
114,020
________
12
ITEM 7 (a) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
(a) QUANTITATIVE INFORMATION ABOUT MARKET RISK (CONTINUED)
iv) 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 twelve-year
sinking fund schedule commencing nine years from April
1, 1995. 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 is
terminated and if all of the Initial Charters are
terminated on the earliest termination dates.
Scheduled No Initial All Initial
Payment Date Charters Charters
Terminated Terminated
$000 $000
April 1, 2004 3,355 1,700
April 1, 2005 6,542 3,480
April 1, 2006 9,526 5,320
April 1, 2007 10,942 6,340
April 1, 2008 10,942 6,880
April 1, 2009 10,942 7,470
April 1, 2010 10,942 8,110
April 1, 2011 10,942 8,800
April 1, 2012 10,942 9,540
April 1, 2013 10,942 10,360
April 1, 2014 10,942 11,240
April 1, 2015 10,941 38,660
________ ________
117,900 117,900
________ _______
(b) QUALITATIVE INFORMATION ABOUT MARKET RISK
The Corporation was organized solely for the purpose of
issuing, as agent on behalf of certain ship Owners, the
Term Mortgage in Notes and Serial Mortgage Notes as
obligations of California Petroleum and loaning the
proceeds of the sale of the Notes to the Owners to
facilitate the funding of the acquisition of four
Vessels from Chevron Transport Corporation.
13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
THE SHAREHOLDERS AND BOARD OF DIRECTORS OF CALIFORNIA PETROLEUM
TRANSPORT CORPORATION
We have audited the accompanying balance sheet of California
Petroleum Transport Corporation as of December 31, 1998 and 1997
and the related statements of income and cash flows for the years
ended December 31, 1996, 1997 and 1998. 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 audits in accordance with United Kingdom
auditing standards, which do not differ in any significant
respect from United States generally accepted auditing standards.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of California Petroleum Transport Corporation at December 31,
1998 and 1997, and the results of its operations and its cash
flows for the years ended December 31, 1996, 1997 and 1998 in
conformity with accounting principles generally accepted in the
United States.
Ernst & Young
Douglas, Isle of Man Chartered Accountants
March 12, 1999
14
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
STATEMENT OF INCOME
(US Dollars in thousands)
Year ended
December 31,
1998 1997 1996
INCOME
Interest income 19,130 20,421 21,659
Recovery of general and
administrative expenses 61 64 64
_______ _______ _______
19,191 20,485 21,723
Deduct:
EXPENSES
Interest payable (18,874) (20,165) (21,403)
General and administrative
expenses (61) (64) (64)
Amortization of debt issue
costs (256) (256) (256)
_______ _______ _______
NET RESULT FOR THE YEAR Nil Nil Nil
======= ======= =======
15
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
BALANCE SHEET
December 31,
(US Dollars in thousands) Notes 1998 1997
ASSETS
Current assets:
Cash and cash equivalents 1 1
Current portion of Serial loan 3 18,160 18,160
Interest receivable 4,637 4,962
Other assets 6 28
_______ ________
TOTAL CURRENT ASSETS 22,804 23,151
Serial loans receivable
less current portion 3 94,850 112,842
Terms loans receivable 4 116,466 116,378
Deferred charges and other
assets 2(b) 2,444 2,700
________ ________
TOTAL ASSETS 236,564 255,071
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Interest accrued 4,637 4,962
Current portion of serial
mortgage notes 5,6 18,160 18,160
Other liabilities 6 28
_______ _______
TOTAL CURRENT LIABILITIES 22,803 23,150
Serial mortgage notes 5,6 95,860 114,020
Term mortgage notes 5,7 117,900 117,900
________ ________
16
TOTAL LIABILITIES 236,563 255,070
________ ________
Shareholders' equity:
Common stock: 1,000 shares
authorized, issued and outstanding 1 1
___ ___
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
236,564 255,071
======== ========
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
STATEMENT OF CASH FLOWS
Year ended
December 31,
1998 1997 1996
(US Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income - - -
Adjustments to reconcile net
income to net cash provided
by operating activities:
Recognition of deferred
expenses 256 256 256
Changes in assets
and liabilities
Accounts receivable 347 295 289
Accounts payable (347) (295) (289)
____ ____ _____
Net cash provided by
operating activities 256 256 256
____ ____ _____
CASH FLOWS FROM INVESTING ACTIVITIES:
Term and Serial loans
repaid 17,904 17,904 16,904
_______ _______ ________
17
Net cash from investing
activities 17,904 17,904 16,904
_______ _______ ________
CASH FLOWS FROM FINANCING ACTIVITIES
Serial notes redeemed (18,160) (18,160) (17,160)
_______ ________ ________
Net cash used in financing
activities (18,160) (18,160) (17,160)
_______ ________ ________
NET INCREASE IN CASH AND
CASH EQUIVALENTS Nil Nil Nil
=== === ===
Cash at bank at beginning
and end of year Nil Nil Nil
=== === ===
18
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The company which is incorporated in Delaware, is a
special purpose corporation that has been organized
solely for the purpose of issuing, as agent on behalf of
Calpetro Tankers (Bahamas I) Limited, Calpetro Tankers
(Bahamas II) Limited, Calpetro Tankers (Bahamas III)
Limited and Calpetro Tankers (IOM) Limited (each an
"Owner" and, together the "Owners"), the Serial Mortgage
Notes and the Term Mortgage Notes as full recourse
obligations of the Company and loaning the proceeds of
the sale of the Notes to the Owners to facilitate the
funding of the acquisition of four vessels from Chevron
Transport Corporation (the "Initial Charterer"). 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 the Initial Charterer.
2. PRINCIPAL ACCOUNTING POLICIES
The financial statements have been prepared in
accordance with United States generally accepted
accounting principles. A summary of the more important
accounting policies, which have been consistently
applied, is set out below:-
(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 general and administrative
expenses incurred by the company.
(b) Deferred charges
Deferred charges represent the capitalization of
debt issue costs. These costs are amortized over
the term of the Notes to which they relate.
(c) Reporting currency
19
The reporting and functional currency is United
States Dollars.
3. SERIAL LOANS
The principal balances of the Serial Loans earn interest
at rates ranging from 7.30% to 7.62% and mature over an
eight year period beginning April 1, 1999. The loans
are reported net of the related discounts, which are
amortized over the term of the loans.
20
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(CONTINUED)
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
twelve-year period beginning nine years from April 1,
1995. The loans are reported net of the related
discounts, which are amortized over the term of the
loans.
5. SERIAL LOANS AND TERM LOANS COLLATERAL
The Term and Serial Loans are collateralized by first
preference 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
the Collateral Trustee. The Initial Charters and
Chevron Guarantees 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 the Stock Pledge Agreements.
6. SERIAL MORTGAGE NOTES
The Serial Mortgage Notes bear interest at rates ranging
from 7.30% to 7.62% through maturity. The Notes mature
over an eight-year period beginning one year from April
1, 1999. Interest is payable semi-annually.
The outstanding serial loans have the following
characteristics:
Principal due Interest Rate Maturity Date
on maturity
$ 000
18,160 7.30% April 1, 1999
18,160 7.35% April 1, 2000
18,160 7.44% April 1, 2001
18,160 7.49% April 1, 2002
21
18,160 7.55% April 1, 2003
12,950 7.57% April 1, 2004
7,740 7.60% April 1, 2005
2,530 7.62% April 1, 2006
________
114,020
________
22
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(CONTINUED)
7. TERM MORTGAGE NOTES
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 twelve-year sinking fund
schedule commencing nine years from April 1, 1995.
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 is
terminated and if all of the Initial Charters are
terminated on the earliest termination dates.
Scheduled No Initial All Initial
Payment Date Charters Charters
Terminated Terminated
$000 $000
April 1, 2004 3,355 1,700
April 1, 2005 6,542 3,480
April 1, 2006 9,526 5,320
April 1, 2007 10,9426 ,340
April 1, 2008 10,942 6,880
April 1, 2009 10,942 7,470
April 1, 2010 10,942 8,110
April 1, 2011 10,942 8,800
April 1, 2012 10,942 9,540
April 1, 2013 10,942 10,360
April 1, 2014 10,942 11,240
April 1, 2015 10,941 38,660
________ ________
117,900 117,900
________ ________
8. RECENTLY ISSUED ACCOUNTING STANDARDS AND SECURITIES AND
EXCHANGE COMMISSION RULES
SFAS No. 133, "Accounting for Derivatives and Hedging
Activities" is effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999 (January 1,
2000 for the Company) and requires that all derivative
instruments be recorded on the balance sheet at their
23
fair value. Changes in the fair value of derivatives
are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative
is designated as part of a hedge transaction and, if it
is the type of hedge transaction.
The Company anticipates that the adoption of SFAS No.
133 will not have a material effect on the presentation
of the Company's balance sheet or results of operations.
24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
DIRECTORS AND EXECUTIVE
OFFICERS OF CALIFORNIA PETROLEUM AGE POSITION
Nancy D. Smith 31 Director and President
Louise E. Colby 50 Director and Assistant
Secretary
R. Douglas Donaldson 57 Treasurer
Jacy L. Wilson 25 Secretary
Nancy D. Smith has been a Director and the President of
California Petroleum since 1994. She joined JH Management
Corporation (a Massachusetts business corporation engaged in the
management of special business corporations for structured
financial transactions) in 1993 as its President and is currently
the Vice President of the corporation. From 1987 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 at Bob Woolf
Associates, Inc.
Louise E. Colby has been a Director of the Corporation 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 Corporation
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.
Jacey L. Wilson has been the Secretary of the Corporation since
1998. She joined the Boston law firm of Ropes & Gray in 1998 as
a paralegal, after obtaining her bachelor's degree in 1995 from
25
Boston College and her master's degree in 1997 from Northeastern
University.
ITEM 11. EXECUTIVE COMPENSATION
The directors and officers of California Petroleum are not
compensated.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table provides information as of March 12,1999 with
respect to the ownership by each person or group of persons,
known by the registrant to be a record owner of 5% or more of the
Common Stock.
Except as set forth below, the Registrant is not aware of any
record owner of more than 5% of the Common Stock as of close of
business on March 12 ,1999.
TITLE OF CLASS NUMBER OF PERCENT OF
OF SECURITIES NAME AND ADDRESS SHARES CLASS
Common Stock The California Trust 1,000 100%
c/o J H Holdings Corporation
P.O. Box 4024
Room 6/9
One International Place
Boston,
Massachusetts 02101
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
None.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(D) BY REGISTRANTS WHICH HAVE NOT
26
REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
No annual report, proxy statement, form of proxy or other
soliciting material has been sent to holders of California
Petroleum's Notes, and the Registrant does not contemplate
sending any such materials subsequent to the filing of this
report.
27
SIGNATURES
Subject to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CALIFORNIA PETROLEUM TRANSPORT CORPORATION
Registrant
/s/ Nancy D. Smith
Nancy D. Smith
President
Date: March 31, 1999
Pursuant to the requirement of the Securities Exchange Act of
1934, this report has been signed below by the following persons
and in the capacities and on the date indicated.
NAME TITLE DATE
/s/ Nancy D. Smith
_______________________
Nancy D. Smith Director and President March 31, 1999
Principal Executive
Officer
28
/s/ Louise E. Colby
_______________________
Louise E. Colby Director March 31, 1999
/s/ R. Douglas Donaldson
________________________
R. Douglas Donaldson Principal Financial and March 31, 1999
Accounting Officer
29
02089007.AA6