Edgar Filing: COASTAL CARIBBEAN OILS & MINERALS LTD

As filed with the Securities and Exchange
Commission on May 1, 2002 Registration No. 333-76522
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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933

COASTAL CARIBBEAN OILS & MINERALS, LTD.
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(Exact name of registrant as specified in its charter)
BERMUDA
-------
(State or other jurisdiction of incorporation or organization)
1330
----
(Primary Standard Industrial Classification Code Number)
NONE
----
(I.R.S. Employer Identification No.)
Clarendon House, Church Street, Hamilton, Bermuda HM CX
Telephone (441) 295-1422
------------------------
(Address including zip code, and telephone number,
including area code of registrant's principal executive offices)
-------------------------------
Timothy L. Largay, Esq.
MURTHA CULLINA LLP
CityPlace, 29th Floor
185 Asylum Street
Hartford, Connecticut 06103
Telephone (860) 240-6017
------------------------
(Name, address, including zip code,
and telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale to the public: As soon after
the effective date as practicable.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ X ]

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

CALCULATION OF REGISTRATION FEE

-------------------------- -------------------------- ----------------- ----------------------- ------------------
Title of each class of Amount to be registered Proposed Proposed maximum Amount of
securities to be maximum aggregate offering registration fee
registered offering price price
per share
-------------------------- -------------------------- ----------------- ----------------------- ------------------
-------------------------- -------------------------- ----------------- ----------------------- ------------------

Common stock, 6,520,249 shares (1) $1.00 (1) $6,520,249 $1,558.34(2)
$.12 per share

-------------------------- -------------------------- ----------------- ----------------------- ------------------

(1) Estimated in accordance with Rule 457(a) under the Securities Act of 1933,
solely for the purpose of calculating the registration fee.
(2) Previously paid on January 10, 2002.

The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

P R O S P E C T U S

________ Shares of Common Stock of
Coastal Caribbean Oils & Minerals, Ltd.

This is an offering of shares of our common stock by subscription right
to our existing shareholders. For every___ shares of common stock held as of
________, 2002, each shareholder will be entitled to purchase __ shares at a
price of $____ per share. In addition, each shareholder who purchases his/her
full allotment of shares will be entitled to purchase additional shares which
are unsubscribed by other shareholders. There is no minimum number of shares
that must be sold in the offering. Shareholders will not receive any interest
for any over subscription payments that are returned.

The Offering
------------

Proceeds to
Your Price Commission Coastal Caribbean
---------- ---------- -----------------

Per Share $ 0 $ 0 $ 0
--------- --- ---- ---

Total $ 0 $ 0 $ 0
----- --- ---- ---

There are no underwriters involved with this offering.

The shares of common stock offered hereby involve a high degree of
risk. You should purchase shares only if you can afford a complete loss. See
"Risk Factors" beginning at page 5 for a discussion of certain factors that you
should consider before you purchase any shares of our common stock.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The date of this prospectus is _____________, 2002.

The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.

TABLE OF CONTENTS
PAGE
Prospectus Summary...........................................................2
Summary Financial Data.......................................................5
Risk Factors.................................................................6
Cautionary Statement About Forward-Looking Statements.......................11
Use of Proceeds.............................................................12
Capitalization..............................................................13
Dilution....................................................................14
Management's Discussion and Analysis of Financial
Condition And Results of Operations.........................................14
Market Risk Disclosures.....................................................17
Our Business and Properties.................................................18
Legal Proceedings...........................................................24
Our Management..............................................................30
Certain Business Relationships..............................................33
Principal Shareholders......................................................34
Description of Our Common Stock.............................................36
Price Range of Our Common Stock.............................................40
Performance Graph...........................................................41
Terms of the Offering.......................................................42
Certain Material Tax Considerations.........................................44
Legal Matters...............................................................47
Experts.....................................................................48
Where You Can Find More Information.........................................48
Index to Consolidated Financial Statements.................................F-1

* * * * *

You should rely only on the information contained in this prospectus.
We have not authorized anyone (including any broker or salesman) to provide you
with information different from that contained in this prospectus. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are offering to sell and seeking offers to buy shares of our common stock
only in jurisdictions where offers and sales are permitted. You should assume
that the information contained in this prospectus is accurate only as of
__________, 2002. You should not assume that this prospectus is accurate as of
any other date.

PROSPECTUS SUMMARY

This summary highlights material information included elsewhere in this
prospectus. This prospectus contains forward-looking statements which involve
risks and uncertainties. You should carefully read the entire prospectus,
including the risk factors which begin at page 5 and the financial statements,
before deciding whether to invest in our common stock.

The Company o Coastal Caribbean Oils & Minerals, Ltd., a Bermuda
corporation, was founded in 1953. Our principal executive
office is located at Clarendon House, Church Street,
Hamilton, Bermuda HM CX. Our telephone number at that
address is (441) 295-1422. Our internet web address
is www.coastalcarib.com. The contents of our web site are
not incorporated into this prospectus. In this prospectus,
"Coastal Caribbean," "we," "us," and "our" refer to
Coastal Caribbean Oils & Minerals, Ltd. and its majority
owned subsidiary, Coastal Petroleum Company, unless the
context otherwise dictates. References to "dollars" or "$"
are to United States dollars. Our principal asset is our
59% interest in Coastal Petroleum Company. Coastal
Petroleum's principal assets are its nonproducing oil, gas
and mineral leases and royalty interests in the State of
Florida. To date, Coastal Petroleum has made no
commercial discoveries on the lands covered by these
leases.Coastal Caribbean is a Passive Foreign Investment
Company for United States federal income tax
purposes. See "Certain Material Tax Considerations -
Passive Foreign Investment Company Rules," page 45.

Our Operating o Since the denial in 1998 of our permit
History application to drill an exploration well on our
property offshore Florida, we have been engaged in
litigation against the State of Florida, at first appealing
that denial and subsequently seeking compensation for the
alleged taking of Coastal Petroleum's property. Although we
have been in business for many years, we are still a
development stage company because our exploration for oil,
gas and minerals has not yielded any significant revenues or
reserves. In recent years our exploration has been extremely
limited.

In 1992, Coastal Petroleum filed an application for a permit
to drill an exploration well on its property offshore
Florida. In 1998 the State of Florida denied the permit
application, and Coastal Petroleum commenced litigation
against the State appealing the denial. When the permit
denial was upheld by a Florida appeals court in July 2000,
Coastal Petroleum commenced litigation in January 2001 to
obtain compensation from the State of Florida for the
alleged taking of Coastal Petroleum's property.

We incurred a loss of $6,585,000 for the year 2001, a loss
of $1,386,000 for the year 2000 and a loss of
$1,105,000 for the year 1999. We had a deficit
accumulated during the development stage of $35,996,000 at
December 31, 2001. You should also see Note 1 of our
financial statements regarding the substantial doubt
about the Company's ability to continue as a going
concern.

The Offering o _________ shares of our common stock, par value $.12 per
share.

Subscription o Each shareholder will be entitled to purchase _ shares for
Privilege every ___ shares of common stock held on the record date
at a price of $ per share.

Over o Each shareholder who purchases the entire guaranteed
Subsciption allotment of shares will be permitted to subscribe pro
Privilege rata for additional shares not purchased by other
shareholders prior to the expiration date. The number of
shares available for purchase by each individual
shareholder pursuant to the over subscription privilege
will be limited to the aggregate number of shares
available after completion of all shareholders' basic
subscription purchases and will be subject to the
allocation rules described at page 42 under the heading
"Terms of the Offering - How the Over-Subscription
Privilege Operates."

How to Purchase o If you wish to purchase shares, you should complete the
Shares subscription card and deliver it, accompanied by full
payment of the subscription price, prior to the
expiration date to our subscription agent.

Our Subscription o American Stock Transfer & Trust Co., 59 Maiden Lane,
New York, NY 10038, Telephone: (800)937-5449.

Common Stock o We had 43,468,329 shares of common stock outstanding at
Outstanding December 31, 2001. If all shares offered are sold, there
will be shares outstanding.

Dividends o We have never declared or paid dividends on our common
stock and do not anticipate declaring or paying any
dividends in the foreseeable future. We plan to retain any
future earnings to reduce our deficit accumulated during
the development stage of $35,996,000 at December 31, 2001
and to finance our operations.

Use of Proceeds o The proceeds of the offering will be used for general
corporate purposes, including working capital and to
continue the litigation against the State of Florida.

Litigation o Coastal Petroleum is currently involved in litigation with
the State of Florida with regard to whether the State's
offshore drilling policy and its denial of Coastal
Petroleum's application for an oil and gas exploration
drilling permit constitute a taking of Coastal Petroleum's
property for which the State must compensate Coastal
Petroleum. We are also involved in litigation with the
State of Florida seeking compensation for confiscation of
certain royalty interest acreage off the Florida coast.
See "Legal Proceedings" at page 24.

SUMMARY FINANCIAL DATA

The following summary financial data for the three years in the period ended
December 31, 2001 are derived from the audited consolidated financial statements
of Coastal Caribbean Oils & Minerals, Ltd. The data should be read in
conjunction with the consolidated financial statements, related notes and other
financial information included in this prospectus. The summary financial data
for the years ended December 31, 1998 and 1997 have been derived from the
consolidated financial statements which are not included in this prospectus.

Years ended December 31,
------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
($) ($) ($) ($) ($)
(Restated) (Restated) (Restated) (Restated)

Net loss (6,585) (1,386) (1,105) (1,155) (1,611)
======= ======= ======= ======= =======

Net loss per share (basic and diluted) (.15) (.03) (.03) (.03) (.04)
==== ==== ==== ===== =====

Cash and cash equivalents and marketable
securities 609 2,959 1,042 2,181 3,749
===== ===== ===== ===== =====

Unproved oil, gas and, mineral
properties (full cost method) - 4,145 4,097 4,073 3,732
===== ===== ===== ===== =====

Total assets 1,077 7,497 5,544 6,648 7,799
===== ===== ===== ===== =====

Shareholders' equity:
Common stock 5,216 5,216 4,807 4,807 4,807
Capital in excess of par value 31,498 31,498 28,693 28,693 28,693
Deficit accumulated during
the development stage (35,996) (29,410) (28,025) (26,919) (25,765)
-------- -------- -------- -------- --------
Total shareholders' equity 718 7,304 5,475 6,581 7,735
======= ======= ====== ====== ========

Common stock shares outstanding (average) 43,468 40,844 40,056 40,056 40,056
====== ====== ====== ====== ======

As more fully described in Notes 1 and 4 to the consolidated financial
statements, we have a limited amount of working capital, have incurred recurring
losses and have a deficit accumulated during the development stage. We have
been and continue to be involved in several legal proceedings against the State
of Florida which limited our ability to commence development activities on our
unproved oil and gas properties or obtain compensation for certain property
rights we believe have been taken. These situations raise substantial doubt
about our ability to continue as a going concern. Our consolidated financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or amounts and classification
of liabilities which may result from the outcome of this uncertainty.

During the year 2001, the Company concluded that its property interests
were impaired by the actions taken by the State of Florida and therefore,
recorded an impairment charge in the amount of approximately $4.2 million to
reflect the write off of these costs. See Note 4. Litigation. During 2001, the
Company restated the deficit accumulated during the development stage at
December 31, 2001 to reflect a write off of certain costs incurred prior to
December 31, 1960 attributable to dry holes on abandoned leases as follows (in
thousands):

Deficit accumulated during the development stage
Balance at December 31, 1997 as previously reported $25,102
Write off of unproved properties 663
---------
Balance at December 31, 1997 as restated $25,765
=======

RISK FACTORS

An investment in our common stock involves a high degree of risk. You should
carefully consider the following risk factors and other information in this
prospectus and the documents we incorporate by reference in evaluating our
company before you purchase any shares of our common stock. If any of the
following risks actually occur, our business, financial condition or results of
operations could be materially adversely affected. In this case, the trading
price of the common stock could decline and you may lose all or part of your
investment.

RISKS RELATED TO OUR BUSINESS AND THE LITIGATION

We have a history of losses and anticipate further losses, which could
cause us to discontinue our business.

Our business has never had substantial revenues and has operated at a
loss in each year since our inception in 1953. We recorded a loss of $6,585,000
for the year December 31, 2001, a loss of $1,386,000 for the year 2000 and a
loss of $1,105,000 for the year 1999. If we continue to sustain losses and are
unable to achieve profitability, we may not be able to continue our business and
may have to curtail, suspend or cease operations. You should also see Note 1 to
our financial statements regarding the uncertainty as to our ability to continue
as a going concern.

During the three years ended December 31, 2001, we spent approximately
$2.7 million on legal expenses primarily for the lawsuits against the State of
Florida relating to drilling permits and royalty interests. If we continue to
incur significant expenses and are unable to raise additional funds to meet
these expenses, we may have to cease or suspend our lawsuits and/or cease
operations entirely.

In the unlikely event that we were to receive drilling permits related
to the St. George Island prospect or other exploratory wells, we would be
required to incur a significant amount of operating expenditures to commence
drilling operations and would need to generate significant revenues to achieve
profitability. We may not be able to achieve or sustain revenues, profitability
or positive cash flow or profitability, if achieved, will be sustained.

Our auditors have expressed the view that our negative working capital,
negative stockholders' equity and capital deficiencies raise substantial doubt
about our ability to continue as a going concern.

Our auditors have included an explanatory paragraph in their report for
the year ended December 31, 2001, indicating there is substantial doubt
regarding our ability to continue as a going concern. The financial statements
included elsewhere in this prospectus do not include any adjustments to asset
values or recorded liability amounts that might be required in the event we are
unable to continue as a going concern. If we are in fact unable to continue as a
going concern, you may lose your entire investment in our common stock.

Without additional financing, we only have enough liquid assets on hand
to continue to operate the Company for part of the year 2002.

We believe that our funds on hand will be sufficient to permit us to
continue to operate through the second quarter of 2002 and to pay the expenses
related to this offering which are estimated to be approximately $350,000. After
that time, we may have to suspend or cease operations unless and until we can
secure additional financing. Effective February 20, 2002, our directors,
officers, legal counsel and administrative consultants have agreed to defer the
payment of all of their salaries and fees until we have working capital of at
least $1 million. We currently do not have any commitments for additional
financing. We may be unable to obtain additional financing in the future on
acceptable terms or at all.

If ultimately the courts rule that the State of Florida may deny us a
permit and not compensate us for the taking of our property, we may be
unable to continue our business.

In the event that the courts determine that the State of Florida is
entitled to deny Coastal Petroleum a permit without compensation, it is likely
that we would be unable to continue our business and that shareholders would
suffer a complete loss of their investment.

We may be unable to raise the additional financing needed to cover the
substantial litigation costs of proving our properties have been taken
and their value.

Coastal Petroleum has filed a claim with the Florida Circuit Court that
its property has been taken by the State of Florida, and that Coastal Petroleum
is owed compensation by the State of Florida. We will need to secure additional
financing to cover the costs of this litigation, which we estimate will be
substantial. If we are unable to secure the additional financing adequate to
fund the costs of such litigation for a lengthy period of time, we might not be
able to conclude the litigation and might have to cease the lawsuits against the
State of Florida without any meaningful recovery.

The State of Florida has far greater resources than we do to prosecute
the litigation.

The State of Florida utilizes lawyers from the Florida Attorney
General's Office, the Department of Environmental Protection and at least two
private law firms to represent its interests in the litigation. In the event
that our funds are exhausted before the conclusion of the litigation, we may be
unable to conclude the litigation and might be required to cease business which
could result in the complete loss of your investment.

If the amount of money we recover from the State of Florida is
inadequate to cover our costs, we may suffer additional losses.

Coastal Petroleum's lawsuits against the State of Florida involve
highly specialized technical engineering and legal judgments. Any recovery that
Coastal Petroleum may receive as a result of a court judgment against the State
of Florida may be insufficient to cover the costs of prosecuting the claims at
trial. If this occurs, we may be forced to cease operations, the value of your
investment in our common stock could decline significantly, and you may realize
a total loss of your investment.

Coastal Caribbean is currently a passive foreign investment company, or
PFIC, for United States federal income tax purposes, which could result in
negative tax consequences to you.

If, for any taxable year, our passive income or our assets that produce
passive income exceed levels provided by U.S. law, we would be a "passive
foreign investment company," or PFIC, for U.S. federal income tax purposes. For
the years 1987 through 2001, Coastal Caribbean's passive income and assets that
produce passive income exceeded those levels and for those years Coastal
Caribbean constituted a PFIC. If Coastal Caribbean is a PFIC for any taxable
year, then our US shareholders potentially would be subject to adverse U.S. tax
consequences of holding and disposing of shares of our common stock for that
year and for future tax years. Any gain from the sale of, and certain
distributions with respect to, shares of our common stock, would cause a U.S.
holder to become liable for U.S. federal income tax under Code section 1291 (the
interest charge regime). The tax is computed by allocating the amount of the
gain on the sale or the amount of the distribution, as the case may be, to each
day in the U.S. shareholder's holding period. To the extent that the amount is
allocated to a year, other than the year of the disposition or distribution, in
which the corporation was treated as a PFIC with respect to the U.S. holder, the
income will be taxed as ordinary income at the highest rate in effect for that
year, plus an interest charge.

Please see a discussion of these consequences below under the heading
"Certain Material Tax Considerations - Passive Foreign Investment Company
Rules". We encourage you to consult with a personal tax advisor for advice
relating to the potential adverse tax consequences related to an investment in
our common shares.

RISKS RELATED TO THE OFFERING

The price of our common stock is volatile, which could hinder your
ability to sell your stock and avoid a loss on your investment.

Our common stock has been quoted and traded in the over-the-counter
market on the "Electronic Bulletin Board" of the National Association of
Securities Dealers, Inc. under the symbol COCBF.OB and on the Boston Stock
Exchange under the symbol COCBF. The market price of our common stock has
fluctuated in the past and may continue to be volatile in the future. As a
result of this volatility, you may find it more difficult to sell our stock in a
declining market and avoid a loss on your investment. This volatility is a
result of a variety of factors, including our current and anticipated results of
operations, and the anticipated outcome of our litigation with the State of
Florida.

Because shares purchased in the offering will be distributed on a
delayed basis, you are at risk of downward price fluctuations prior to receipt
of certificates representing your shares.

Until certificates representing the shares you purchase are delivered
upon expiration of the rights offering, you will not be able to resell your
shares. Certificates representing the shares you purchase will be delivered as
soon as practicable after expiration of the rights offering. However, during
this interim time period, you may sustain an immediate unrealized loss on your
investment if our stock price declines below the offering price.

Purchasers in this offering will experience immediate net tangible
asset dilution and may experience further dilution from the future
exercise of stock options or from future stock offerings.

We expect that the offering price of our common stock in this offering
will be substantially higher than the net tangible book value per share of our
outstanding common stock. Accordingly, if the offering is successful, purchasers
of common stock in the offering will experience immediate and substantial
dilution of approximately $. in net tangible book value per share, or
approximately % of the assumed public offering price of $ per share. Investors
will incur additional dilution upon the exercise of outstanding stock options
and warrants. See "Dilution" at page 14 for further discussion of the dilution
that new investors will incur.

Finally, if we raise additional funds by issuing equity or convertible
debt securities, your percentage ownership may be further diluted. Any
securities issued could have rights, preferences and privileges senior to our
common stock.

Our Bye-laws contain provisions which may limit a shareholder's efforts
to influence our policies and prevent or delay a change in control of
our Company.

Bye-Law 1 provides that any matter to be voted on at any meeting of
shareholders must be approved not only by a simple majority of the shares voted
at such meeting, but also by a majority of the shareholders present in person or
by proxy and entitled to vote at the meeting. This provision may have the effect
of making it more difficult to take corporate action than customary "one share
one vote" provisions, because it may not be possible to obtain the necessary
majority of both votes. As a consequence, Bye-Law 1 may make it more difficult
that a takeover of the company will be consummated, which could prevent the
company's shareholders from receiving a premium for their shares. In addition,
an owner of a substantial number of shares of our common stock may be unable to
influence our policies and operations through the shareholder voting process
(e.g., to elect directors).

Our Bye-Laws also require the approval of 75% of the voting
shareholders and of the voting shares for the consummation of any business
combination (such as a merger, amalgamation or acquisition proposal) involving
our company. This higher vote requirement may deter business combination
proposals which shareholders may consider favorable.

You may face obstacles to bringing suit in Bermuda against our officers
and directors.

We are a Bermuda company and certain of our directors and officers are
residents of Bermuda and are not citizens of the United States. As a result, it
may be difficult for investors to effect service of process on us or on these
directors and officers within the United States or to enforce against these
directors and officers judgments of U. S. courts predicated on the civil
liabilities under the federal securities laws. If investors are unable to bring
such suits, they may be unable to recover a loss on their investment resulting
from any violations of the federal securities laws.

There is no precedent for, and therefore no assurance that, the courts
in Bermuda would enforce civil liabilities, whether in original actions in
Bermuda or in the form of final judgments of U. S. courts, arising under the
federal securities laws against us or the persons signing this registration
statement. In addition, there is no treaty in effect between the U. S. and
Bermuda providing for the enforcement of civil liabilities and there are grounds
upon which Bermuda Courts may not enforce judgments of U. S. courts. In
addition, some remedies available under the laws of U. S. jurisdictions,
including some remedies available under the United States federal securities
laws, may not be allowed in Bermuda courts as contrary to that nation's public
policy.

Our dividend policy could depress our stock price.

We have never declared or paid dividends on our common stock and do not
anticipate declaring or paying any dividends in the foreseeable future. We plan
to retain any future earnings to reduce our deficit accumulated during the
development stage of $35,996,000 at December 31, 2001 and to finance our
operations. As a result, our dividend policy could depress the market price for
our common stock.

Any dividends are subject to a 30% withholding tax.

We are a Bermuda corporation. Bermuda currently imposes no taxes on
corporate income or capital gains realized outside of Bermuda. However, any
dividends we receive from Coastal Petroleum are subject to a 30% United States
withholding tax. As a result, our investors may realize a smaller rate of return
on their investment in our common stock.

RISKS RELATED TO OUR INDUSTRY

The State of Florida has stated that its policy is not to permit oil
and gas drilling offshore Florida and the State has denied Coastal
Petroleum a permit with respect to its St. George's Island prospect.
Consequently, we do not believe that the State of Florida will grant
drilling permits to Coastal Petroleum with respect to its leases. In
the unlikely event that the State ever does grant Coastal Petroleum a
drilling permit, Coastal Petroleum would have to contend with other
risks.

After obtaining a state drilling permit, Coastal Petroleum would have
to do the following:

o obtain a federal drilling permit;

o finance drilling of the well (including the cost of the recommended
surety), which is currently estimated to cost approximately $5.5
million; and

o begin drilling the well within one year of the date the state permit
is issued.

We may be unable to obtain the necessary federal permits or we may be
unable to finance and commence drilling operations in a timely manner.

If we fail to discover and develop sufficient oil and gas reserves, we
would be unable to generate sufficient revenues to cover our costs and might
have to curtail, suspend or cease our business operations.

Drilling activities involve numerous risks, including the risk that no
commercially productive natural gas or oil reservoirs will be discovered. The
cost of drilling, completing and operating wells is often uncertain, and
drilling operations may be curtailed, delayed or canceled as a result of adverse
conditions beyond our control. Poor results from our exploration and drilling
activities could prevent us from developing sufficient oil and gas reserves at a
commercially acceptable cost.

Compliance with environmental and other governmental regulations could
be costly.

Our operations and right to obtain interests in and hold properties or
to conduct our business might be affected to an unpredictable extent by
limitations imposed by the laws and regulations which are now in effect or which
might be adopted by the jurisdictions in which we carry on our business.

Further measures that have been or might be imposed include increased
bond requirements, conservation, proration, curtailment, cessation or other
forms of limiting or controlling production of hydrocarbons or minerals, as well
as price controls or rationing or other similar restrictions. In particular,
environmental control and energy conservation laws and regulations adopted by
federal, state and local authorities may have to be complied with by
leaseholders such as Coastal Petroleum.

We face strong competition from larger oil and gas companies that may
impair our ability to carry on operations.

If we receive the necessary state and federal permits to conduct
operations, we will operate in the highly competitive areas of oil and gas
exploration, development and production. We might not be able to compete with,
or enter into cooperative relationships with, our potential competitors, which
include major integrated oil companies, substantial independent energy
companies, affiliates of major interstate and intrastate pipelines and national
and local gas gatherers. If we were unable to establish and maintain
competitiveness, our business would be threatened.

Many of our competitors possess greater financial, technical and other
resources than we do. Factors which affect our ability to successfully compete
in the marketplace include:

o the financial resources of our competitors;

o the availability of alternate fuel sources; and

o the costs related to the extraction and transportation of oil and gas.

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

In this prospectus we make statements that relate to our future plans,
objectives, expectations and intentions that involve risks and uncertainties. We
have based these statements on our current expectations and projections about
future events. These statements may be identified by the use of words such as
"expect," "anticipate," "intend," "plan," "believe" and "estimate" and similar
expressions. Any statements that refer to expectations, projections or other
characterizations of future events or circumstances are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, and are subject to the safe harbor created by that Act.

Forward-looking statements necessarily involve risks and uncertainties.
Our actual results could differ materially from those discussed in, or implied
by, these forward-looking statements. Factors that could contribute to such
differences include, but are not limited to, those discussed in the "Risk
Factors" section at page 5 and elsewhere in this prospectus. The factors set
forth in the Risk Factors section and other cautionary statements made in this
prospectus should be read and understood as being applicable to all related
forward-looking statements wherever they appear in this prospectus.

All subsequent written and oral forward-looking statements attributable
to us are expressly qualified in their entirety by the cautionary statements.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.

USE OF PROCEEDS

The proceeds will be used for general corporate purposes, including
working capital and continuation of the Florida litigation. See "Legal
Proceedings" and "Our Business and Properties." Assuming all of the shares
offered by this prospectus are sold at a price of $ per share, we will realize
net proceeds (after estimated expenses of the offering of $350,000) of
approximately $___________. The net proceeds of the offering would be added to
our general funds and would not be expressly designated for any particular
purpose. However, we currently expect that the net proceeds would be used for
the following purposes, assuming that we received 25%, 50%, 75% and 100%,
respectively, of the offered proceeds:

25% 50% 75% 100%
--- --- --- ----
Litigation (including
legal fees and experts'
costs)
Administrative,
accounting, legal and
other expenses
Total

Litigation expenses may vary depending on the progress of the cases in
which we are involved. If the net proceeds are substantially less than the
estimated amounts, and if we and Coastal Petroleum are unable to obtain
additional funds, Coastal Petroleum may be unable to pursue the Florida
litigation. If the gross proceeds of the offering do not exceed the costs of
this offering, we would attempt to pay the excess costs over gross proceeds from
our current assets.

CAPITALIZATION

The following table shows our cash and cash equivalents, investments
and total capitalization:

o on an actual basis as of December 31, 2001; and

o as adjusted to reflect the sale of shares of common stock offered by
this prospectus at an assumed public offering price of $ per share,
after deducting the estimated offering expenses of approximately
$300,000 payable by us.

You should read this information together with our financial statements
and the notes relating to those statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Use of Proceeds"
appearing elsewhere in this prospectus.

As of December 31, 2001

Actual As adjusted

Cash and cash equivalents $609,024 $
======== ===========
Marketable Securities - -
Short-Term Debt - -
Long-Term Debt - -
Minority Interests - -
Shareholders Equity:
Common stock, par value $.12 per share:
250,000,000 shares authorized
43,468,329 shares outstanding
49,988,578 shares outstanding as adjusted
Common stock $ 5,216,199
Capital in excess of par value 31,497,362
Deficit accumulated during the development stage (35,995,567)
------------
Total Shareholders Equity $ 717,994 $
============ ===========

The number of shares as adjusted for this offering excludes:

o 925,000 shares which may be issued upon the exercise of
outstanding options held by our directors and officers as of
December 31, 2001; and
o 7,800,000 shares which may be issued in the event that Lykes Minerals
Corp. exercises its rights to exchange Coastal Petroleum shares for
shares of our common stock.

DILUTION

You will experience immediate and substantial dilution in net tangible
book value of your common stock as a result of this offering. The following
table illustrates the per share dilution to purchasers of shares giving effect
to the sale of all of the shares in the offering at a price of $ per share:

Offering price attributable to each share of common stock $_____
Net tangible book value before the offering (1) $.____
Increase attributable to payments for shares of common stock .____
Pro forma net tangible book value per share after the offering ._____
Dilution to purchasers of the shares (2)(3) $
=

(1) We calculate net tangible book value per share by dividing the number of
shares of common stock outstanding into the tangible net worth of Coastal
Caribbean (tangible assets less liabilities and minority interest) outstanding
at December 31, 2001.

(2) We calculate dilution to new investors by subtracting net tangible book
value per share of common stock after the offering from the per share price
attributable to a share of common stock purchased.

(3) This estimate of dilution does not reflect the results of operations since
December 31, 2001 nor does it give any effect to the outstanding options to
purchase shares of our common stock. There are 7,800,000 shares of common stock
reserved which may be issued in exchange for 78 Coastal Petroleum shares. There
are also 980,000 shares reserved for stock options granted to our officers,
directors and consultants. Of these options, 925,000 were exercisable at
December 31, 2001. If the options to acquire the 8,725,000 shares had been
exercised at December 31, 2001, the dilution to purchasers would be $. per
share. The dilution of the 7,800,000 shares does not reflect any value for the
increase in ownership of Coastal Petroleum from approximately 59% to 86%.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Overview

The following is a discussion of certain factors affecting our results
for the three fiscal years ending December 31, 2001 and our liquidity and
capital resources. This discussion should be read along with our consolidated
financial statements and their notes, which can be found at page F-1 of this
prospectus.

Liquidity and Capital Resources

Short Term Liquidity

At December 31, 2001, Coastal Caribbean had approximately $609,000 of
cash and cash equivalents available and this amount should be sufficient to fund
the Company's operations through the second quarter of 2002 and to pay the
remaining expenses associated with the proposed rights offering of approximately
$260,000. After June 30, 2002, the Company may have to suspend or cease
operations unless and until the Company can secure additional financing. In
addition, an estimated minimum amount of $500,000 would be necessary to fund the
Company's operations through December 31, 2002. These funds are expected to be
used for general corporate purposes, including lease rental payments of
approximately $60,000 annually and to continue the litigation against the State
of Florida. The estimated working capital necessary to fund the Company's
operations, including the costs of the litigation and the proposed rights
offering, for 2002 is approximately $2,400,000. Effective February 20, 2002, our
directors, officers, legal counsel and administrative consultants have agreed to
defer the payment of all of their salaries and fees until the Company has
working capital of at least $1 million. The amount of this deferral, which is
included in the 2002 working capital requirements of approximately $2,400,000,
amounts to approximately $1,300,000 on an annual basis.

Coastal Caribbean has a limited amount of working capital, has incurred
recurring losses and has an deficit accumulated during the development stage. On
January 16, 2001, Coastal Petroleum filed a complaint in the Leon County Circuit
Court in Florida against the State of Florida seeking compensation for the
State's taking of its property rights to explore for oil and gas within its
Lease 224-A. The cost of that litigation has been substantial and will require
the Company to obtain additional capital. On January 10, 2002, the Company filed
a preliminary registration statement for the sale of its common stock. The terms
of the offering have not yet been determined.

As more fully described in Notes 1 and 4 to the consolidated financial
statements, we have a limited amount of working capital, have incurred recurring
losses and have a deficit accumulated during the development stage. We have
been and continue to be involved in several legal proceedings against the State
of Florida which has limited our ability to commence development activities on
our unproved oil and gas properties or obtain compensation for certain property
rights we believe have been taken. These situations raise substantial doubt
about our ability to continue as a going concern. Our consolidated financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or amounts and classification
of liabilities which may result from the outcome of this uncertainty.

Long Term Liquidity

On January 16, 2001, Coastal Petroleum Company filed a complaint in the
Leon County Circuit Court, Florida against the State of Florida seeking
compensation for the State's taking of its property rights to explore for oil
and gas within its state Lease 224-A. The Company expects that the cost of the
litigation will be substantial.

In the event that the offering of the Company's common stock referred
to above is inadequate to fund the Company's capital needs, the Company intends
to explore other possible funding sources, particularly the other shareholders
of Coastal Petroleum.

Results of Operations

The Company, a development stage enterprise, has never had substantial
revenues and has operated at a loss each year since its inception in 1953.
During the three years ended December 31, 2001, we spent approximately $2.7
million on legal expenses primarily for the lawsuits against the State of
Florida relating to drilling permits and royalty interests.

2001 vs. 2000
-------------

We incurred a loss of $6,585,000 for the year 2001, compared to
a loss of $1,386,000 for the year 2000.

Interest income and other income increased 24% from $63,000 in 2000 to
$78,000 in 2001 because of the funds realized and invested from the October 2000
sale of common stock to our shareholders.

Legal fees and costs increased 164% to $1,670,000 for 2001 from
$634,000 in 2000. Legal fees and costs increased in 2001 in connection with
Coastal Petroleum Company's lawsuit against the State of Florida seeking
compensation for the State's alleged taking of its property rights to explore
for oil and gas within its state Lease 224-A. We expect that the cost of the
litigation will be substantial.

Administrative expenses decreased in 2001 to $534,000 from $535,000 in
the 2000.

Salaries did not change during the periods and remained at $152,000 in
2001.

Shareholder communications costs decreased slightly to $106,000 in 2001
compared to $108,000 in 2000.

Exploration costs decreased from $20,000 in 2000 to $500 in 2001
because of the State of Florida's denial of the Company's application for a
permit to drill on Lease 224-A. In 2000, Coastal Petroleum incurred expenses
associated with drilling permit applications in connection with shallow test
wells to comply with Coastal Petroleum's drilling obligations.

Write off of unproved properties totaled $4,202,000 in 2001. During
2001, the Company concluded that the value of its leases has been taken and its
property interests were impaired by the actions taken by the State of Florida
and therefore, has recorded an impairment charge to reflect the write off of
these costs. All future costs incurred in connection with the Company's Florida
leases will be expensed as incurred.

2000 vs. 1999
-------------

We recorded a loss of $1,386,000 for 2000, compared to a loss of
$1,105,000 in 1999.

Interest income and other income increased 13% to $63,000 in 2000 from
$55,000 in 1999 because more funds were available for investment during 2000
after our sale of common stock was completed in October 2000.

Legal fees and costs increased 56% in 2000 to $634,000 compared to
$405,000 in 1999 because in 2000 the we prepared our complaint to file in the
Florida Circuit Court to claim that the Coastal Petroleum's Lease 224-A had been
taken by the State of Florida. We also recorded a noncash charge to legal
expense in the amount of $75,000 in connection with the issuance of a stock
option grant in 2000.

Administrative expenses increased 13% during 2000 to $535,000 compared
to $474,000 in 1999. During December 1999, we increased our Directors and
Officers liability insurance coverage from $6.2 million to $12.2 million which
increased insurance costs.

Salaries decreased 4% to $152,000 during 2000 compared to $158,000
during 1999. An employee who has not been replaced left Coastal Petroleum during
1999.

Shareholder communications costs increased 5% from $103,000 in 1999 to
$108,000 in 2000 because of the cost of various listing fees.

Exploration costs decreased 6% from $21,000 in 1999 to $20,000 in 2000.
These miscellaneous exploration expenses do not include the exploration
expenditures totaling $48,000 that were capitalized in 2000 ($24,000 in 1999).

MARKET RISK DISCLOSURES

We do not have any significant exposure to market risk as the only
market risk sensitive instruments are its investments in marketable securities
which are classified as cash and cash equivalents. At December 31, 2001, the
carrying value of such investments was approximately $497,000, the fair value
was $500,000 and the face value was $500,000.

OUR BUSINESS AND PROPERTIES
General

Coastal Caribbean is a company organized under the laws of Bermuda,
with its principal executive offices at Clarendon House, Church Street,
Hamilton, Bermuda (telephone number: 441-295-1422). Shares of our common stock
are listed on the Boston Stock Exchange and also are traded over-the-counter on
the "Electronic Bulletin Board" marketplace of the National Association of
Securities Dealers, Inc. We rely heavily on consultants for legal, accounting
and administrative services. Our principal asset is our 59.25% owned subsidiary,
Coastal Petroleum, a Florida corporation.

Operations

Coastal Petroleum is the lessee under leases with the State of Florida
relating to the exploration for and production of oil, gas and minerals on
approximately 3,700,000 acres of submerged lands along the Gulf Coast and under
certain inland lakes and rivers. The leases provide for a working interest in
approximately 1,250,000 acres and a royalty interest in approximately 2,450,000
acres covered by the leases. Coastal Petroleum has made no commercial
discoveries on its leaseholds.

Coastal Petroleum is currently involved in litigation with the State of
Florida with regard to whether the State's policy against offshore drilling and
denial of Coastal Petroleum's application for an oil and gas exploration
drilling permit constitutes a taking of Coastal Petroleum's property for which
the State must compensate Coastal Petroleum. In addition, Coastal Caribbean is a
party to one additional action in which Coastal Caribbean claims that certain of
its royalty interests have been confiscated by the State. During 2001, the
Company actively pursued the Florida Litigation. See "Legal Proceedings".

In 1990, the State of Florida enacted legislation that prohibits
drilling or exploration for oil or gas on Florida's offshore acreage. The law
does not apply to areas where Coastal Petroleum is entitled to conduct
exploration. However, in those areas where Coastal Petroleum has only a royalty
interest, the law effectively prohibits production of oil and gas, rendering it
impossible for Coastal Petroleum to collect royalties from those areas.

Business

Coastal Caribbean was organized in Bermuda on February 14, 1962. We are
the successor to Coastal Caribbean Oils, Inc., a Panamanian corporation
organized on January 31, 1953 to be the holding company for Coastal Petroleum.

We own 59.25% of Coastal Petroleum. We are considered to be a
development stage company since our exploration for oil, gas and minerals has
not yielded any significant revenues. Coastal Petroleum's principal assets are
its nonproducing oil, gas and mineral leases and royalty interests. In 1992,
Coastal Petroleum filed an application for a permit to drill an exploration well
on its property offshore Florida. In 1998, the State of Florida denied the
permit application and Coastal Petroleum commenced litigation against the State
appealing the denial. The permit denial was upheld by a Florida appeals court in
July 2000 and Coastal Petroleum in January 2001 filed a complaint against the
State of Florida seeking compensation from the State of Florida. Coastal
Petroleum believes that its leases have been confiscated by the State of
Florida. Coastal Petroleum also believes the leases or the potential recovery
from the State of Florida are properly considered to be assets, although we have
written off the costs related to its oil, gas and mineral properties. If we
continue to incur significant expenses and are unable to raise additional funds
to meet these expenses, we may have to cease or suspend our lawsuits and/or
cease operations entirely.

In the event that Coastal Petroleum is unsuccessful in its effort to
establish that its property has been taken without compensation, the Company
would likely consider the sale of its interest in Coastal Petroleum Company and
a subsequent liquidation of the Company.

Properties

Coastal Petroleum holds certain working interests in nonproducing oil,
gas and mineral leases covering approximately 1,250,000 acres, and a royalty
interest in approximately 2,450,000 acres, in and offshore the State of Florida.
No commercial oil or gas discoveries have been made on the properties covered by
these leases and Coastal Petroleum has no proved reserves of oil or gas and has
had no significant production.

In 1941, Arnold Oil Explorations, Inc., renamed Coastal Petroleum
Company in 1947, entered into a contract with the Trustees of the Internal
Improvement Trust Fund of the State of Florida, in whom title to publicly owned
lands in the State of Florida, including bottoms of salt and fresh waters, is
irrevocably vested, for the exploration of oil, gas and minerals on such lands.
The Trustees and Coastal Petroleum entered into three leases in late 1944 and
early 1946. The acreage covered by these leases is located for the most part
along offshore areas on the Gulf Coast of Florida and in submerged lands under
certain bays, inlets, riverbeds and lakes, of which Lake Okeechobee is the
largest.

In 1968, Coastal Petroleum sued the Secretary of the Army of the United
States in a permitting dispute. In 1969, as part of that litigation, the
Trustees claimed that the leases were invalid and had been forfeited. Coastal
Petroleum and the Trustees settled their disagreement on January 6, 1976.

Under the terms of the 1976 settlement agreement, the two leases (224-A
and 224-B) bordering the Gulf Coast were divided into three areas, each running
the entire length of the coastline from Apalachicola Bay to the Naples area:

o The inner area, including rivers, bays, and harbors, extends seaward
from the Florida shoreline a distance of 4.36 statute miles (5,280 feet
per statute mile) into the Gulf, covers approximately 2.25 million
acres, and is subject to a royalty interest payable to Coastal
Petroleum. This interest is a 6.25% royalty on the wellhead value of
all oil and gas, 25 cents per long ton on sulphur, receivable in cash
or in kind at Coastal Petroleum's option, and a 5% royalty on
production or the market value of other minerals.

o The middle area, which was three statute miles wide and contained more
than 800,000 acres, was released by Coastal Petroleum to the Trustees,
and Coastal Petroleum has no further interest in the area.

o Coastal Petroleum presently owns a 100% working interest in the outside
area, which extends seaward an additional three statute miles and
borders federal offshore acreage. This area, exceeding 800,000 acres,
remains subject to royalties payable to the State of Florida of 12.50%
on oil and gas, $.50 per long ton of sulphur and 10% on other minerals.
The Florida legislature has enacted statutes designed to protect the
Big Bend Seagrass Aquatic Preserve, an area covering approximately one
quarter of Coastal Petroleum's working interest area. However, the
legislation and legislative history recognize and preserve Coastal
Petroleum's prior rights as granted by the leases.

Coastal Petroleum retains a 100% working interest in 450,000 acre Lake
Okeechobee which is a part of Lease 248 and which is also subject to royalties
payable to the State of Florida of 12.50% on oil and gas, $.50 per long ton of
sulphur and 10% on other minerals. Under the settlement with the State of
Florida in 1976, Coastal Petroleum agreed not to conduct exploration, drilling
or mining operations on Lake Okeechobee without the prior approval of the State.
As to the balance of this lease, covering approximately 200,000 acres, Coastal
Petroleum retains royalty interests of 6.25% on oil, gas and sulphur and 5% on
other minerals.

Under the 1976 settlement agreement with the Trustees, the three leases
have a term of 40 years beginning from January 6, 1976 and require the payment
of an annual rental of $59,247; if oil, gas or minerals are being produced in
economically sustainable quantities at January 6, 2016, these operations will be
allowed to continue until they become uneconomic. Further, the settlement
agreement provides that the drilling requirements shall be governed by Chapter
20680, Laws of Florida, Acts of 1941, and that all other drilling requirements
are waived. Under the 1941 Act, a lessee is required to drill at least one test
well on lands leased in each five year period under the term of the lease.
Coastal Petroleum believes it is current in fulfilling its drilling
requirements. Drilling requirements of Lease 224-A have been satisfied through
the five year obligation period ending August 2, 2004. The State of Florida has
refused Coastal Petroleum the right to drill on Lease 248 since August 10, 1986.
Drilling requirements of Lease 224-B have been satisfied through the five year
obligation period ended October 31, 2000. The next obligation period expires on
October 31, 2005.

The following charts reflect the acreage and annual rental obligations
resulting from the 1976 settlement agreement with the Trustees and the
approximate acreage under lease at December 31, 2001:
Acreage
Working Royalty Annual
Interest Interest Rental
224-A and 224-B 800,000 2,250,000 $39,261
248 450,000 200,000 19,986
---------- ---------- --------
1,250,000 2,450,000 $59,247
========= ========= =======

Acreage under lease at December 31, 2001
-------------------------------------------------------------------------------
Gross Acres (*) Net Acres (**)
--------------- --------------
Undeveloped Developed Undeveloped Developed

Working Interest 1,250,000 -0- 1,250,000 -0-
Royalty interest 2,450,000 -0- 153,125 -0-
--------- --- --------- ---
Total 3,700,000 -0- 1,403,125 -0-
========= === ========= ===

* A gross acre is an acre in which a working interest is owned.
** A net acre is when the sum of fractional ownership working interests in
gross acres equals one. The number of net acres is the sum of the
fractional working interests owned in gross acres expressed as whole
numbers and fractions.

Competitive Conditions in the Business.

Competition in the oil and gas industry is intense. We must compete
with companies which have substantially greater resources available to them. In
addition, the industry as a whole must compete with other industries in
supplying the energy needs of commerce and the general public. Furthermore,
competitive conditions may be substantially affected by energy legislation which
may be adopted in the future.

Environmental Regulation.

The operations of Coastal Caribbean and its right to obtain interests
in and hold properties or to do business may be affected to an unpredictable
extent by limitations imposed by the laws and regulations which are now in
effect or which may be adopted by the jurisdictions in which the Coastal
Petroleum carries on its business. Further measures that have been or might be
imposed include increased bond requirements, conservation, proration,
curtailment, cessation or other forms of limiting or controlling production of
hydrocarbons or minerals, as well as price controls or rationing or other
similar restrictions. In particular, environmental control and energy
conservation laws and regulations adopted by federal, state and local
authorities may have to be complied with by leaseholders such as Coastal
Petroleum. It is not possible to predict the nature of any further legislation
or regulation that might ultimately be adopted or its effects upon the future
operations of Coastal Caribbean or Coastal Petroleum.

Employees

We currently have only two employees. We rely heavily on consultants
for legal, accounting, geological and administrative services. We use
consultants because it is more cost effective than employing a larger full time
staff.

The following graphic presentation has been omitted, but the following is a
description of the omitted material:

Map showing Coastal Petroleum's Lease Areas in the State of Florida

Disclosure Concerning Oil and Gas

Undeveloped Acreage

The Company's undeveloped acreage as of December 31, 2001 was as
follows:

Gross Acres Net Acres
----------- ---------
Working Interest 1,250,000 1,250,000
Royalty Interest 2,450,000 153,125
--------- --------
Total 3,700,000 1,403,125
========= =========

Drilling Activity

There was no drilling activity on our properties during the year 2001.

Royalties and Other Interests

In addition to royalties payable to the State of Florida as set forth
above, Coastal Petroleum's leases are subject to several royalties and other
interests. The leases are presently subject to overriding royalties aggregating
1/16 as to oil, gas and sulphur and 13/600ths as to minerals other than oil, gas
and sulphur.

We also have granted to certain officers, directors, counsel and
consultants of Coastal Petroleum and Coastal Caribbean the right to receive a
percentage of the net recoveries from the Florida Litigation. See "Legal
Proceedings" at page 24 and "Certain Business Relationships" at page 33.

Mineral Rights

Coastal Petroleum's Leases 224-A, 224-B and 248 were determined by a
Florida State court in 1960 to cover not only oil, gas and sulphur, but also all
other minerals. Subsequent litigation has held that these other minerals do not
embrace certain deposits of shell accumulated on water bottoms which had not yet
become mineral, and that Lake Hancock is not within the area covered by Lease
224-B. Under the 1976 settlement agreement with the State of Florida, Coastal
Petroleum retains a 5% royalty with respect to mineral production. However, it
cannot conduct mining operations in 450,000-acre Lake Okeechobee without the
prior approval of the State of Florida. Although Coastal Petroleum had conducted
limited mineral exploration activities on its leases, the courts during the
1980's limited its rights to mine minerals. Coastal Petroleum has no independent
knowledge of commercial deposits on its leases. Furthermore, Coastal Petroleum
does not anticipate that the State would allow the open pit mining and heavy
industrial activity that would be necessary to remove any minerals if they were
to be present, given the State's objection to a single bore hole for an
exploratory oil and gas well.

LEGAL PROCEEDINGS
Florida Litigation

Coastal Petroleum has been involved in various lawsuits for many years.
Coastal Petroleum's current litigation now involves one basic claim: whether the
State's offshore drilling policy and its denial of a permit constitute a taking
of Coastal Petroleum's property. In addition, Coastal Caribbean is a party to
another action in which Coastal Caribbean claims that certain of its royalty
interests have been confiscated by the State.
Lease Taking Case

On January 16, 2001, Coastal Petroleum filed a complaint in the Leon
County Circuit Court, Florida against the State of Florida seeking compensation
for the State's taking of its property rights to explore for oil and gas within
its state Lease 224-A. The lease encompasses more than 400,000 acres off the
West coast of Florida in the Gulf of Mexico.

Coastal Petroleum claims that the State of Florida has taken Lease
224-A by denying Coastal Petroleum a permit to drill an offshore exploration
well near St. George Island in the Gulf of Mexico. The history of the litigation
between Coastal Petroleum and the State of Florida relating to the denial of the
drilling permit is set forth under the caption "Drilling Permit Litigation."
Coastal Petroleum maintains that the State has effectively taken Coastal
Petroleum's lease by depriving Coastal Petroleum of all or substantially all of
the economically viable use of its constitutionally protected property.

The State claims that there has been no taking of Coastal Petroleum's
property which justifies compensation. The State asserts several affirmative
defenses, including that:

(a) Coastal Petroleum is barred from litigating issues which it has
litigated in prior cases against the State and other parties;

(b) Coastal Petroleum's leases are not constitutionally protected
property which can be the subject of an inverse condemnation claim, relying in
part on earlier litigation;

(c) Coastal Petroleum's claim that its property has been taken is not
ripe for legal consideration because Coastal Petroleum has not applied to drill
on other locations on its leaseholds;

(d) The statute of limitations bars any allegation by Coastal Petroleum
that an action taken by any state entity prior to January 16, 1997 constitutes a
taking of Coastal Petroleum's alleged property interest;

(e) Coastal Petroleum has no right to drill for oil on Lease 224-A
which can be taken because it does not have the permit which it agreed to obtain
pursuant to the 1976 Memorandum of Settlement.

On March 5, 2001, the State filed a Motion to Dismiss Coastal
Petroleum's complaint, which was denied by the Court on April 26, 2001. After
the Motion was denied, discovery, which had been suspended pending the outcome
of the Motion to Dismiss, resumed. Some depositions have now been taken,
documents have been exchanged and discovery is expected to continue until the
court mandated cutoff date of August 25, 2002. A motion for summary judgment by
the State of Florida in the taking lawsuit is scheduled to be heard by the Leon
County Circuit trial judge on June 13, 2000.

On November 27, 2001, the Leon County Circuit Court set a trial date of
September 30, 2002. The Court has set aside two weeks for the trial on the issue
of whether the State has taken Coastal Petroleum's lease. If the Court rules in
Coastal Petroleum's favor, there will then be a second trial before a jury to
determine the amount of compensation to be awarded. Both the decision of the
Court and any decision of a jury are subject to appeals by any of the parties to
the litigation.

Ancillary Matters to Lease Taking Case

On February 13, 2001, certain holders of royalties pertaining to Lease
224-A filed a Motion to Intervene as Additional Plaintiffs. On April 24, 2001,
the Leon County Circuit trial judge granted certain royalty holders with
overriding royalties, which aggregate approximately 4% on State Lease 224-A, the
right to intervene on a limited basis in the takings lawsuit. On May 22, 2001,
the royalty holders appealed the Circuit Court's order granting them limited
intervention to the First District Court of Appeal, claiming the order denied
them the right to fully participate in the case until after final judgment and
that the court erroneously found that the royalty holders lack an ownership
interest in Coastal Petroleum's lease. On June 12, 2001, the Court of Appeal
ordered the royalty holders to show cause why the appeal should not be dismissed
for lack of jurisdiction. The royalty holders filed a response to the Court of
Appeal on June 21, 2001, Coastal Petroleum filed its reply on July 2, 2001 and
the State of Florida filed its reply on July 5, 2001. The Court of Appeal is
currently considering the matter.

Counsel for the appealing royalty holders has advised Coastal Petroleum
that the royalty holders' position is that their interest is worth substantially
more than 4% of whatever judgment may be awarded to Coastal Petroleum in the
litigation and that they intend to make a claim against any recovery Coastal
Petroleum may obtain in the litigation. Coastal Petroleum has informed the
Circuit Court and counsel for the royalty holders that Coastal Petroleum is not
making any claim in the litigation on behalf of any interest the royalty holders
may have.
`
No Assurances

There is no assurance that Coastal Petroleum will be successful on the
merits of its claims, which the State of Florida is vigorously defending. There
is also no assurance that Coastal Petroleum will receive a ruling that its Lease
224-A has been taken or that if compensation is awarded it will be awarded in
the amount sought by Coastal Petroleum.

Drilling Permit Litigation

In 1992, Coastal Petroleum applied to the Florida Department of
Environmental Protection (the "DEP") for a permit to drill an exploratory oil
and gas well off Apalachicola, Florida. The proposed well would be located in an
area included within Lease 224-A. The DEP subsequently denied the application
for issuance of a drilling permit for various reasons and imposed a $1.9 billion
bond. Coastal Petroleum appealed the actions of the DEP to the Florida First
District Court of Appeal ("Court of Appeal"). After two decisions by the Court
of Appeal in favor of Coastal Petroleum, the Florida Supreme Court in July 1996
denied the DEP's petition to review an April 1996 Court of Appeal decision. The
Florida Supreme Court had also refused to review an earlier Court of Appeal
decision.

On August 16, 1996, the DEP notified Coastal Petroleum that it was
prepared to issue the drilling permit subject to Coastal Petroleum publishing a
Notice of Intent to Issue ("Notice") the permit. The Notice allowed interested
parties to request administrative hearings on the permit.

On May 28, 1997, the Oil and Gas Drilling Bill (SB550) was enacted in
Florida. The legislation requires that a surety be based on the projected
cleanup costs and possible natural resource damage associated with offshore
drilling as estimated by the DEP and as established by the Administration
Commission (the "Commission") which is comprised of the Governor of Florida and
the Cabinet. Previously, the required surety was satisfied by a payment of
$4,000 to the Mineral Trust Fund in the first year, with a maximum $30,000 per
year and a payment of $1,500 per well for each subsequent year. On September 9,
1997, the State of Florida set a new surety amount of $4.25 billion as a
precondition for the issuance of the drilling permit.

On October 20, 1997, a public hearing on the permit application
convened and concluded on November 6, 1997. The hearing included the Company's
appeal of the $4.25 billion surety requirement. On April 8, 1998, a Florida
Administrative Law Judge recommended that Coastal Petroleum was entitled to a
drilling permit with the requirement of a $225 million surety. On May 13, 1998,
the Commission rejected the $225 million surety and remanded the proceedings to
the Administrative Law Judge with instructions to recalculate the surety amount.

On May 22, 1998, the DEP denied the permit to Coastal Petroleum to
drill an offshore exploration well near St. George's Island. Coastal Petroleum
appealed both the denial of the permit by the DEP and the imposition of the
surety to the Court of Appeal.

On October 6, 1999, the Court of Appeal ruled that the DEP has the
authority to deny Coastal Petroleum's drilling permit for its St. George Island
prospect, provided that Coastal Petroleum receives just compensation for what
has been taken. The State of Florida and certain Florida environmental groups
filed on November 1, 1999 a joint motion for clarification, rehearing, or
certification with respect to that decision, asking the Court of Appeal, among
other things, to clarify that the question of whether there has been a taking of
Coastal Petroleum's leases should be determined in the Circuit Court. On June
26, 2000, the Court of Appeal denied all of the State's motions and stated that
the issue of whether the denial of a permit constituted a "taking" was not
before the Court. The Court declined to rule on the merits of the taking issue
and stated that the issue was a matter for the Circuit Court. On January 16,
2001, Coastal Petroleum Company filed a complaint in the Leon County Circuit
Court, Florida against the State of Florida seeking compensation for the State's
taking of its property rights to explore for oil and gas within its state Lease
224-A. That complaint is described above under the caption. Lease Taking Case.

Other Permit Applications

On February 25, 1997 Coastal Petroleum filed 12 additional applications
for drilling permits. Coastal Petroleum objected to certain requests for
additional data by the Florida DEP. On March 26, 1999, an administrative law
judge upheld the DEP's requirements. The First District Court of Appeal affirmed
the decision of the administrative law judge on February 29, 2000.

In order to more fully permit the Apalachicola Reef Play, which
includes the St. George Island prospect, on October 29, 1998, Coastal Petroleum
filed four additional permit applications (1310-1313). The DEP also requested
additional data for these applications. As of April 30, 2002, Coastal Petroleum
has not yet submitted the requested data. Although these applications are still
pending, Coastal Petroleum does not believe the DEP will ever grant these
permits.

Coastal Caribbean Royalty Litigation

The offshore areas covered by Coastal Petroleum's original leases
(prior to the 1976 Settlement Agreement) are subject to certain other royalty
interests held by third parties, including Coastal Caribbean. On April 20, 1994,
several of those third parties, including Coastal Caribbean, which has
approximately a 12% interest in any recovery, have instituted a separate lawsuit
against the State of Florida in the 5th Judicial Circuit in Hernando County.
That lawsuit claims that the royalty holders' interests have been confiscated as
a result of the State's actions discussed above and that they are entitled to
compensation for that taking. The royalty holders were not parties to the 1976
Settlement Agreement, and the royalty holders contend that the terms of the
Settlement Agreement do not protect the State from taking claims by those
royalty holders. The case was subsequently transferred to the 2nd Judicial
Circuit in Leon County and it is currently pending before the Circuit Court in
Tallahassee. On December 2, 1999, the Circuit Court denied the State's motion to
dismiss the plaintiffs' claim of inverse condemnation but dismissed several
other claims.

On May 10, 2000, the State filed a motion for summary judgment but no
hearing date has been set for the motion. Discovery is proceeding.

Any recovery made in the royalty holders' lawsuit would be shared among
the various plaintiffs in that lawsuit, including Coastal Caribbean, but not
Coastal Petroleum.

Counsel

The Tampa, Florida law firm of Gaylord Merlin Ludovici Diaz & Bain is
Coastal Petroleum's principal trial counsel in Coastal Petroleum's inverse
condemnation claim against the State of Florida in Florida Circuit Court. Mr.
Cary Gaylord is the lead attorney for Gaylord Merlin. Mr. Gaylord, age 55, has
extensive experience in eminent domain and property rights matters. He is a 1969
graduate of the United States Military Academy and a 1974 graduate of the
University of Florida Law School.

In addition, Mr. Robert J. Angerer of Angerer & Angerer of Tallahassee,
Florida is assisting Gaylord Merlin in the litigation. Mr. Angerer, age 55, is a
1969 graduate of the University of Michigan and received his law degree with
high honors from Florida State University in 1974.

Statutory Attorneys' Fees

Chapter 73 of Florida law provides in eminent domain proceedings (which
would include Coastal Petroleum's taking claim) that, in addition to the award
made to the property owner, the court shall award attorneys' fees based on the
difference between the final judgment or settlement and the first written offer
made to the property owner by the State in accordance with the following
schedule:

1. Thirty-three percent of any difference up to $250,000; plus
2. Twenty-five percent of any portion of the difference between
$250,000 and $1 million; plus
3. Twenty percent of any portion of the difference exceeding $1
million.

Contingency Fees

In 1990, Coastal Petroleum considered that the following firms or
individuals were important to the success of the litigation against the State of
Florida and agreed to pay them an aggregate of 8.65% in contingent fees based on
any net recovery from execution on or satisfaction of judgment or from
settlement of the Florida litigation:

Relationship to Net
Coastal Petroleum Recovery
Holder at Date of Grant Percentage
------ ---------------- ----------
Reasoner, Davis & Fox Special Counsel 2.00
Robert J. Angerer Litigation Counsel 1.50
Benjamin W. Heath Chairman of the Board 1.25
Phillip W. Ware President 1.25
Murtha Cullina LLP Corporate Counsel 1.00
Ausley & McMullen, P.A. (*) Special Counsel .75
James R. Joyce Assistant Treasurer .30
Arthur B. O'Donnell Vice President /Treasurer .30
James J. Gaughran Secretary .30
---
Total 8.65
====

(*) Interest was granted in 1996.

In addition, Coastal Petroleum has agreed to pay Gaylord Merlin a
contingent fee equal to the greater of:

(a) approximately 90% of the statutory award of attorneys' fees
(discussed above), less the hourly fees paid to Gaylord
Merlin, or

(b) ten percent of the first $100 million or portion thereof of
the compensation received by Coastal Petroleum from the State
as compensation for the taking of its property, plus five
percent of such compensation in excess of $100 million, less
the hourly fees paid to Gaylord Merlin and other costs of the
litigation.

Each of the individuals and entities to whom contingent fees were
granted were, at the time of grant, actively involved in the litigation. The
contingencies were granted as an incentive to, and in consideration of, the
continued involvement of those individuals and entities.

Uncertainty

Coastal Petroleum or Coastal Caribbean may not prevail on any of the
issues set forth above and may not recover compensation for any of their claims.
In addition, even if Coastal Petroleum were to prevail on any or all of the
issues to be decided, Coastal Caribbean or Coastal Petroleum may not have
sufficient financial resources to survive until such decisions become final. In
the unlikely event that the State of Florida were to grant a permit to drill any
wells for which applications have been filed, the wells drilled may not be
successful and may not lead to production of any oil or gas in commercial
quantities.

OUR MANAGEMENT

Our Directors and Executive Officers

Our board of directors includes six members, two of whom, Messrs. Heath
and Ware, also serve as executive officers. The board is divided into three
classes, with each class serving a term of office of three years.

Name Position Biographical Information
---- -------- ------------------------

Class of 2002

Benjamin W. Heath Director Mr. Heath has been a director since 1962. He also serves
President as Chairman and a director of Coastal Petroleum. He is
also a director of Canada Southern Petroleum Ltd. Age
eighty-six.

Phillip W. Ware Director Mr. Ware, a geologist, has been President and a director of
Vice President Coastal Petroleum since 1985. Mr. Ware has been a director
since 1985. Age fifty.
Class of 2003

Graham B. Collis Director Mr. Collis, a director since 1998, has been a member of the
Secretary law firm of Conyers Dill & Pearman, Hamilton, Bermuda, our
Audit Committee Bermuda counsel since 1995. Age forty-one.

John D. Monroe Director Mr. Monroe is a real estate broker and was formerly
Audit Committee President of a real estate brokerage and development firm
in Naples, Florida. Mr. Monroe, a director since 1981, is
also a director of our subsidiary, Coastal Petroleum.
Age seventy-five.

Class of 2004

Nicholas B. Dill Director Mr. Dill has been a consultant to the law firm of Conyers
Dill & Pearman, Hamilton, Bermuda, our Bermuda counsel
since 2000. Previous, Mr. Dill had been a member of the
firm for many years. Mr. Dill, a director since 1997, is
also a director of Worldwide Securities Ltd, Bermuda
Electric Light Co. Ltd., Bermuda Waterworks Ltd. and SAL
Ltd. Age sixty-eight.

Timothy L. Largay Director Timothy L. Largay has been a partner in the law firm of
Vice President and Murtha Cullina LLP, Hartford, Connecticut since 1974. He
Assistant Secretary was elected a director and Vice President of the Company on
January 15, 2001. Mr. Largay is also a director and
Secretary of Canada Southern Petroleum Ltd. and a director
of Magellan Petroleum Corporation. Murtha Cullina has been
retained by the Company for more than five years and is
being retained during the current year. Age fifty-eight.

Our other executive officer is the Chief Financial Officer. All of the
officers of Coastal Caribbean are elected annually by the board and report
directly to it.

James R. Joyce Treasurer, Assistant Mr. Joyce has been our Treasurer, Assistant Secretary and
Secretary and Chief Chief Financial Officer since 1994. He is also President,
Financial Officer Chief Financial Officer and a director of
Magellan Petroleum Corporation. Mr. Joyce is President
of G&O'D INC, a firm that provides accounting and
administrative services, office facilities and support
to Coastal Caribbean and other clients. Age sixty-one.

Only Messrs. Heath and Ware received direct compensation for their
services as officers of Coastal Caribbean or Coastal Petroleum. Mr. Heath and
Mr. Ware devote approximately 50% and 100% respectively of their professional
time to the business and affairs of Coastal Caribbean and Coastal Petroleum. The
other non-executive officers devote a small percentage of their professional
time as officers on behalf of the companies except for Mr. Joyce, who devoted
approximately 27% of his time during the year 2001.

All of the named companies are engaged in oil, gas or mineral
exploration and/or development except where noted. The business experience
described for each director or executive officer above covers the past five
years.

We are not aware of any arrangements or understandings between any of
the individuals named above and any other person by which any of the individuals
named above was selected as a director and/or executive officer. We are not
aware of any family relationship among the officers and directors of Coastal
Caribbean or its subsidiary.

Committees of Our Board of Directors

Board of Directors; Committees; Attendance

The only standing committee of the Board is the Audit Committee which
is comprised of Mr. Graham B. Collis and Mr. John D. Monroe. The Audit Committee
is governed by an Audit Committee Charter which requires the committee to
perform the following functions:

(1) to recommend the particular persons or firm to be employed by
Coastal Caribbean as its independent auditors;

(2) to consult with the persons or firm so chosen to be the independent
auditors with regard to the plan of audit;

(3) to review, in consultation with the independent auditors, their
report of audit, or proposed report of audit, and the accompanying
management letter, if any; and

(4) to consult with the independent auditors (periodically, as
appropriate, out of the presence of management) with regard to
the adequacy of internal controls.

The full Board of Directors performs the functions that would be
performed by the nominating and compensation committees. A stock option
committee is appointed periodically.

Compensation Committee Interlocks and Insider Participation

The Board of Directors of Coastal Petroleum consists of three persons,
Mr. Heath, Mr. Ware and Mr. Monroe. The entire Coastal Petroleum Board of
Directors performs the functions that would be performed by a compensation
committee. Benjamin W. Heath is President and a director of Coastal Caribbean.
He is also Chairman and a director of Coastal Petroleum and is compensated only
by Coastal Petroleum. Phillip W. Ware is Vice President and a director of
Coastal Caribbean. He is also President and a director of Coastal Petroleum and
is compensated only by Coastal Petroleum.

Compensation of Directors

All of our directors except for directors who are also executive
officers receive annual directors' fees in the amount of $22,500. For the year
2001, Messrs. Collis, Dill, and Monroe each received directors' fees of $22,500
and Mr. Largay received $21,263 in fees. Effective February 20, 2002, Messrs.
Collis, Dill, Largay and Monroe will defer the payment of all of their
directors' fees until our working capital is at least $1 million.

Executive Compensation

The following table sets forth certain summary information concerning
the compensation of our two executive officers. No other executive officer
earned compensation in excess of $100,000 during the year 2001.

----------------------------------------------------------------------------------------------------------------------
Summary Compensation Table
----------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term
------------------- Compensation
Name and Award All Other
Principal Position Year Salary ($) Options/SARs (#) Compensation ($)
----------------------------------------------------------------------------------------------------------------------

Benjamin W. Heath, President and 2001 40,000 - 18,075(1)
Chief Executive Officer 2000 40,000 100,000 15,600(1)
1999 40,000 - 15,550(1)
----------------------------------------------------------------------------------------------------------------------
Phillip W. Ware, Vice President 2001 92,000 - 13,800(2)
2000 92,000 100,000 13,800(2)
1999 92,000 - 13,800(2)
----------------------------------------------------------------------------------------------------------------------

(1) Reimbursement for office expenses $12,075 in 2001, $9,600 in 2000, and
$9,550 in 1999, and payments to a SEP-IRA pension plan $6,000 in 2001, 2000
and 1999.
(2) Payment to SEP-IRA pension plan.

Stock Options

The following table provides information about unexercised stock
options held by the Named Executive Officers at December 31, 2001:

-----------------------------------------------------------------------------------------------------------------------
Aggregated Option/SAR Exercises in 2001 and December 31, 2001
Option/SAR Values
-----------------------------------------------------------------------------------------------------------------------
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised In-The-Money
On Exercise Realized ($) Options/SARs (#) Options/SARs ($)
(#) at December 31, 2001 at December 31, 2001
-----------------------------------------------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
-----------------------------------------------------------------------------------------------------------------------

Benjamin W. Heath -0- -0- 100,000 - 9,000 -
Benjamin W. Heath -0- -0- 45,000 - -0- -
-----------------------------------------------------------------------------------------------------------------------

Phillip W. Ware -0- -0- 100,000 - 9,000 -
Phillip W. Ware -0- -0- 72,000 - -0- -
-----------------------------------------------------------------------------------------------------------------------

Certain Business Relationships

G&O'D INC

During the year 2001, G&O'D INC charged us a total of $135,573 for
accounting and administrative services, office facilities and support staff
which includes two full time and two part time persons. Mr. James R. Joyce, the
Company's Treasurer and Assistant Secretary, owns the firm of G&O'D whose fees
are based on the time spent in performing services for us.

There is no written agreement between G&O'D and the Company. The
Company believes that the arrangement with G&O'D is as favorable to the
Company as could be obtained from an unaffiliated third party.

Royalty Interests

The State of Florida oil, gas and mineral leases held by Coastal
Petroleum on approximately 3,700,000 acres of submerged lands along the Gulf
Coast and certain inland lakes and rivers are subject to certain overriding
royalties aggregating 1/16th as to oil, gas and sulphur, and 13/600ths as to
minerals other than oil, gas and sulphur. Of the overriding royalties as to oil,
gas and sulphur, a 1/90th overriding royalty, and of the overriding royalties on
minerals other than oil, gas and sulphur, a 1/60th overriding royalty, is held
by Johnson & Company, a Connecticut partnership which is used as a nominee by
the members of the family of the late William F. Buckley. A trust, in which Mr.
Heath has a 54.4% beneficial interest, has a beneficial interest in such royalty
interest held by Johnson & Company. No payments have been made to Johnson &
Company (or to the beneficial owners of such royalty interests) in more than
forty years.

In 1990, Coastal Petroleum granted to our current officers the
following percentages of any net recovery from execution on or satisfaction of
judgment or from settlement of the lawsuit against the State of Florida as
follows:

Percent of Coastal Petroleum
Name Net Recovery Position
---- ------------ ----------
Benjamin W. Heath 1.25 Chairman of Board
Phillip W. Ware 1.25 President
James R. Joyce 0.30 Treasurer

PRINCIPAL SHAREHOLDERS

Security Ownership of Certain Beneficial Owners

The following table provides information as to the number of shares of
our stock owned beneficially at December 31, 2001 by each person who is known to
be the beneficial owner of more than 5% of the outstanding shares of our common
stock.
Amount and Nature of
Beneficial Ownership
--------------------
Name and Address of Shares Held Shares Subject
Beneficial Owner Directly to Option Percent of Class
-------------------------- --------- ----------- ----------------

Leon S. Gross 4,499,688 - 10.34
3900 Ford Road
Philadelphia, PA 19131

Lykes Minerals Corp. - 7,800,000* 15.2**
111 East Madison Street
P.O. Box 1690
Tampa, FL 33601
------------------------
* Lykes Minerals Corp. has purchased a total of 78 shares of Coastal
Petroleum which are convertible into 7,800,000 of our shares.

** Assumes all outstanding options held by Lykes Mineral Corp are
exercised to acquire our shares.

Security Ownership of Management

The following table sets forth information as to the number of shares
of the Company's common stock owned beneficially at December 31, 2001 by each
director of the Company and by all directors and executive officers as a group:

Amount and Nature of Beneficial Ownership
-----------------------------------------
Shares Held Directly or Percent of
Name of Individual or Group Indirectly Options Class
--------------------------- --------------------------- ------- -----

Graham B. Collis 25,000(1) 112,000 *
Nicholas B. Dill - (2) 124,000 *
Benjamin W. Heath 20,000 145,000 *
John D. Monroe 400 136,000 *
Timothy L. Largay 49,200 100,000 *
Phillip W. Ware 3,791 172,000 *
Directors and executive officers
as a group (a total of 7 persons) 111,579 925,000 2.3%

----------------------
* Less than 1%.
(1) Director of Lane Enterprises (Bermuda) Limited, a Bermuda company, which
also owns 17,758 shares.
(2) Director of Brackish Pond Company Limited, a Bermuda company, which owns
3,355 shares.

DESCRIPTION OF OUR COMMON STOCK
General

Our Memorandum of Association provides that we may issue up to
250,000,000 shares of common stock. We only have one class of stock. As of
December 31, 2001, we had approximately 9,000 shareholders of record with a
total of 43,468,329 shares of common stock outstanding. Below is a brief
description of our common stock and the rights of shareholders as determined
under Bermuda law. Neither Bermuda law, nor our Memorandum of Association or
Bye-laws impose any limitations on the rights of non-residents of Bermuda to
vote and hold our shares of common stock. Set forth below is a summary of the
principal terms of our Memorandum and Bye-laws governing our common stock.

Common Stock

Dividend Rights. The holders of common stock are entitled to receive
dividends, if and when the Board of Directors declares them. Each share
outstanding is entitled to share equally with every other share in every
dividend distribution. Current Bermuda law does not restrict the remittance of
dividends to Bermuda non-residents, and any dividends paid to U.S. shareholders
would not be subject to a withholding tax. We have never declared or paid
dividends on our common stock and do not anticipate declaring or paying any
dividends in the foreseeable future. We plan to retain any future earnings to
reduce our deficit accumulated during the development stage of $35,996,000 at
December 31, 2001 and to finance our operations.

Classified Board of Directors. Bye-Law 81 provides that the Board of
Directors is divided into three classes. See "Our Management - Our Directors and
Executive Officers" above.

Liquidation Rights. Subject to the rights of creditors, all rights to
the assets of Coastal Caribbean available for distribution upon liquidation are
vested in the holders of common stock and each share is entitled to participate
equally with every other share in such liquidation.

Pre-emptive Rights, Conversion Rights, Redemption Provisions, Sinking
Fund and Further Assessments. The holders of common stock have no pre-emptive
rights. There are no conversion rights attached to the common stock and there
are no provisions for sinking funds or redemption of shares. Under Bermuda law
unless authorized by our Memorandum of Association or Bye-Laws, we may not
repurchase our own common stock, and our Memorandum of Association and Bye-Laws
do not permit us to redeem shares of common stock. The holders of outstanding
common stock are not liable to any further calls or assessments by us on their
shares.

Shareholder Suits. Class actions and derivative actions are generally
not available to shareholders under the laws of Bermuda. However, the Bermuda
courts ordinarily would be expected to follow English case law precedent, which
would permit a shareholder to commence an action in our name to remedy a wrong
done to us where the act complained of is alleged to be beyond our corporate
power or is illegal or would result in the violation of our Memorandum of
Association or Bye-Laws. Furthermore, consideration would be given by the court
to acts that are alleged to constitute a fraud against the minority shareholders
or where an act requires the approval of a greater percentage of shareholders
than actually approved it. The winning party in such an action generally would
be able to recover a portion of attorneys' fees incurred in connection with such
action.

Taxes. Bermuda currently imposes no taxes on corporate income or
capital gains realized outside of Bermuda, nor is there any withholding tax on
any dividends that we might pay to you. Any amounts received by us from U. S.
sources as dividends, interest, or other fixed or determinable annual or
periodic gains, profits and income, will be subject to a 30% U. S. withholding
tax. In addition, any dividends from Coastal Petroleum will not be eligible for
the 100% dividends received deduction, which is allowable in the case of a U. S.
parent corporation. U. S. residents or citizens holding shares are subject to
federal estate and gift and local inheritance taxation. Any dividends received
by U. S. resident or citizens will also be subject to federal, state and local
income taxation. These rules are of general application only and reflect law in
force as of the date of this prospectus. We encourage shareholders to seek
professional advice for the current rules applicable to their particular
circumstances.

Under current Bermuda law, we are not required to pay any income tax or
capital gains tax. We have obtained from the Bermuda Minister of Finance an
assurance under The Exempted Undertakings Tax Protection Act 1966 of Bermuda, to
the effect that in the event of there being enacted in Bermuda any legislation
imposing tax computed on profits or income, or computed on any capital asset,
gain or appreciation, or any tax in the nature of estate duty or inheritance
tax, then the imposition of any such tax shall not be applicable to us or to any
of our operations, shares, debentures or other obligations until 2016. These
assurances are subject to the condition that they are not interpreted so as to
prevent the application of any tax or duty to such persons as are ordinarily
resident in Bermuda or to prevent the application of any tax payable in
accordance with the provisions of The Land Tax Act 1967 of Bermuda or otherwise
payable in relation to any property we lease. We are required to pay annual
Bermuda government fees.

Foreign Exchange Control Regulations. We have been designated as a
non-resident for exchange control purposes by the Bermuda Monetary Authority
whose permission for the issue of shares of common stock pursuant to this
Offering has been obtained. This designation allows us to engage in
transactions, or to pay dividends to non-residents of Bermuda who are holders of
our shares, in currencies other than the Bermuda Dollar.

The transfer of shares between persons regarded as resident outside
Bermuda for exchange control purposes and the issue of shares after the
completion of this offering to or by such persons may take place without
specific consent under the Exchange Control Act 1972. Issues and transfers of
shares involving any person regarded as resident in Bermuda for exchange control
purposes require specific prior approval under the Exchange Control Act 1972.

Non-Bermuda owners of our shares of common stock are not restricted in
the exercise of the rights to hold or vote their shares. Because we have been
designated as a non-resident for Bermuda exchange control purposes, there are no
restrictions on our ability to transfer funds in and out of Bermuda or to pay
dividends to U. S. residents who are holders of our common stock, other than in
respect of local Bermuda currency.

Under Bermuda law, share certificates are only issued in the names of
corporations or individuals. In the case of an applicant acting in a special
capacity (for example as a trustee), certificates may, at the request of the
applicant, record the capacity in which the applicant is acting, but we are not
bound to investigate or incur any responsibility in respect of the proper
administration of any such trust. We will take no notice of any trust applicable
to any of our shares whether or not we have notice of the trust.

As an "exempted company", we are exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudans, but
as an exempted company we may not participate in certain business transactions
including: (1) the acquisition or holding of land in Bermuda (except that
required for their business and held by way of lease or tenancy for terms of not
more than 50 years) without the express authorization of the Bermuda
legislature, (2) the taking of mortgages on land in Bermuda to secure an amount
in excess of $50,000 without the consent of the Minister of Finance, (3) the
acquisition of any bonds or debentures secured by any land in Bermuda, other
than certain types of Bermuda government securities or (4) the carrying on of
business of any kind in Bermuda, except in furtherance of their business carried
on outside Bermuda.

We will be required to comply with the provisions of the Companies Act
regulating the payment of dividends and making distributions from contributed
surplus. Pursuant to the Companies Act, a company shall not declare or pay a
dividend, or make a distribution out of contributed surplus, if there are
reasonable grounds for believing that: (1) the company is, or would after the
payment be, unable to pay its liabilities as they become due; or (2) the
realizable value of the company's assets would thereby be less than the
aggregate of its liabilities and its issued share capital and share premium
accounts.

Voting Rights. All voting rights are vested in the holders of common
stock, each share voting equally with every other share. Shareholders are not
entitled to cumulative voting. The holders of 25% of the total number of shares
entitled to be voted at the meeting, present in person or by proxy constitutes a
quorum for the transaction of business. Bye-Law 1 provides that any matter to be
voted upon at any meeting of shareholders must be approved, not only by a simple
majority of the shares voted at such meeting, but also by a simple majority of
the shareholders voting.

Bye-Law 1 provides in part that shareholder approval requires:

a resolution passed by both (i) simple majority of votes cast
by such Members as, being entitled so to do, vote in person
or, in the case of any Member being a corporation, by its duly
authorized representative or, where proxies are allowed, by
proxy and (ii) a simple majority in number of the Members
present in person or in the case of any Member being a
corporation by its duly authorized representative or where
proxies are allowed, by proxy, at a general meeting of which
not less than fourteen (14) clear days' Notice (save where a
longer period is required by these Bye-laws) has been duly
given PROVIDED THAT when shares are held by members of another
company, firm, partnership, association or other body
corporate or unincorporated and such persons act in concert,
or when shares are held by or for a group of Members who act
in concert, such persons shall be deemed to be one Member.

Bye-Law 163 requires that a resolution adopted by the holders of 75% or
more of the outstanding common stock and adopted by not less than 75% of the
shareholders is required to approve any business combination (defined as any
"arrangement, reconstruction, amalgamation, takeover, or similar business
combination") involving the Company and any other person.

Limitation of Director Liability and Indemnification

Director liability. The Companies Act imposes two basic duties on each
director and officer:

Duty of loyalty. A director or officer must act honestly and in good
faith with a view to the best interests of the company. This means that
in conflict of interest situations, a director must place the best
interests of the company above his own personal interests. It also
means that a director may not use his position as a director to make a
personal profit from opportunities that rightfully belong to the
company.

Duty of care. A director or officer must exercise the care, diligence
and skill that a reasonably prudent person would exercise in comparable
circumstances. Based on English case law precedent, this means that a
director must act reasonably in accordance with the level of skill
expected from a person of his knowledge and experience. A director must
attend diligently to the company's affairs, but is permitted to do so
on an intermittent rather than a continuous basis. A director may
delegate management functions to suitably qualified persons, although
he will not avoid his duty by delegation to others.

A Bermuda court is unlikely to interfere with decisions of directors
unless one of these two duties is breached. The court must find that the
directors acted in bad faith or that no reasonable board of directors could have
come to the decision that was reached.

Director indemnification. We may under Bermuda law indemnify our
directors and officers for any loss or liability that they may incur in their
capacity as our directors and officers. The loss or liability may result from
any law that finds them guilty of negligence, default, breach of duty or breach
of trust. A director or officer may not be indemnified for his own fraud or
dishonesty.

Legal expenses. We are required to pay all expenses, including
attorney's fees, incurred by a director in defending any legal proceeding as
they are incurred in advance of final disposition if the director agrees to
repay those amounts if it is proved by clear and convincing evidence that the
director's action or omission was undertaken with deliberate intent to cause
injury to the company or with reckless disregard for our best interests and if
the director reasonably cooperates with the corporation during the proceeding.

Bye-Laws. Our Bye-Laws provide for indemnification of our director and
officers which is coextensive with that permitted under Bermuda law.

D&O Insurance. Coastal Caribbean has directors' and officers' liability
insurance coverage in the amount of $12,200,000 at an annual cost of $208,000.

Transfer Agent and Registrar

Our transfer agent and registrar is American Stock Transfer and Trust
Company, 59 Maiden Lane, New York, New York 10038. Telephone: 800-937-5449, or
718-921-8200. Website: http://www.amstock.com.

Price Range of Our Common Stock

The principal market for our common stock is the Boston Stock Exchange
under the symbol COCBF. Our common stock is also traded in the over-the-counter
market on the "Electronic Bulletin Board" of the National Association of
Securities Dealers, Inc. under the symbol COCBF.OB. The quarterly high and low
closing prices on the Boston Stock Exchange were as follows:

-------------------------------------------------------------------------------
2002 1st quarter 2nd quarter(1)
---- --------------- -----------

High 1.02 .90
Low .76 .65
-------------------------------------------------------------------------------
2001 1st quarter 2nd quarter 3rd quarter 4th quarter
---- ----------- ----------- ----------- -----------

High 1.81 1.75 1.32 1.05
Low .85 .90 .85 .80
-------------------------------------------------------------------------------
2000 1st quarter 2nd quarter 3rd quarter 4th quarter
---- ----------- ----------- ----------- -----------

High 1.19 1.19 2.50 1.13
Low 0.88 0.53 1.00 0.69
------------------------------------------------------------------------------
1999 1st quarter 2nd quarter 3rd quarter 4th quarter
---- ----------- ----------- ----------- -----------

High 1.88 2.00 1.81 2.06
Low 1.00 1.50 1.31 1.06
------------------------------------------------------------------------------
(1) Through April 30, 2002

On December 31, 2001, the closing price of our common stock on the
Boston Stock Exchange was $1.00. On December 31, 2001, approximately 9,000
shareholders of record owned our outstanding common stock.

The total share trading volume on the Boston Stock Exchange was
1,625,800 for 2001, 3,914,100 for 2000 and 4,279,100 for 1999. The total share
trading volume from January 1, 2002 to April 30, 2002 was 1,338,000.

PERFORMANCE GRAPH

The graph below compares the cumulative total returns, including
reinvestment of dividends, if applicable, of our stock with the companies in the
NASDAQ Market Index Media General's Independent Oil & Gas Industry Group. The
chart displayed below is presented in accordance with SEC requirements.
Shareholders are cautioned against drawing any conclusions from the data
contained therein, as past results are not necessarily indicative of future.

COMPARISON OF CUMULATIVE TOTAL RETURN
January 1, 1997 to December 31, 2001

[OBJECT OMITTED]

----------------------------- -------------- ------------- -------------- -------------- -------------- -------------
1996 1997 1998 1999 2000 2001
----------------------------- -------------- ------------- -------------- -------------- -------------- -------------

Coastal Caribbean 100 62.50 41.07 39.29 30.29 28.57
----------------------------- -------------- ------------- -------------- -------------- -------------- -------------
Independent Oil & Gas 100 93.10 60.30 84.48 122.60 100.19
----------------------------- -------------- ------------- -------------- -------------- -------------- -------------
NASDAQ Market Index 100 122.32 172.52 304.29 191.25 152.46
----------------------------- -------------- ------------- -------------- -------------- -------------- -------------

TERMS OF THE OFFERING

Basic Subscription Privilege

We are offering for sale, to our shareholders only, a total of shares
of our common stock. For every shares that you hold on the record date, 2002,
you are guaranteed the right to purchase shares for a purchase price of $ per
share. If you purchase all of the shares that you are guaranteed the right to
buy, you will also have the right to purchase additional shares which are
contingent on the number of shares that are not purchased by the other
shareholders.

The shares being offered for sale will first be allocated to satisfy
the shareholders' guaranteed right to purchase shares. If there are unsold
shares remaining after these allocations, then any unsold shares will be
allocated in the manner described below among the shareholders who exercised
their contingent right to purchase the unsold shares.

The subscription right is not transferable. The offering is not subject
to a minimum number of subscriptions and shareholders need not purchase a
minimum number of shares.

How the Over-Subscription Privilege Operates

Subject to the allocation rules described below, each subscription
right also grants each shareholder an over-subscription privilege to purchase
additional shares of common stock, to the extent available and subject to
proration, that are not purchased by other shareholders pursuant to their basic
subscription privileges. If you wish to exercise your over-subscription
privilege, you should indicate the number of additional shares that you would
like to purchase in the space provided on your subscription certificate. When
you send in your subscription certificate, you must also send the full purchase
price for the number of additional shares that you have requested to purchase
(in addition to the payment due for shares purchased through your basic
subscription privilege).

In the event that our shareholders do not subscribe for all of the
_____________ offered shares pursuant to their exercise of basic subscription
privileges, then shareholders requesting additional shares pursuant to their
over-subscription privileges will be allocated such additional shares on a
pro-rata basis (subject to elimination of fractional shares), based on the ratio
that the number of available shares bears to the total number of shares that are
the subject of all shareholders over-subscription requests. For example, assume
that our shareholders subscribe for a total of shares, shares of which are
guaranteed. Under the terms of the offering shares are being offered for sale,
shares would be issued to shareholders who purchased their guaranteed shares.
The remaining shares offered for sale (_________ minus __________) would be
available for the shareholders who exercised their contingent right to purchase
shares on a pro rata basis. Each shareholder who exercised his contingent right
would receive % ( available divided by contingent rights) of his contingent
amount of available shares.

As soon as practicable after ______________ __, 2002, The American
Stock Transfer & Trust Company, acting as our Subscription Agent, will determine
the number of shares of common stock that you may purchase pursuant to the
over-subscription privilege. You will receive certificates representing these
shares as soon as practicable after ____________ __, 2002.

Subject to state securities laws and regulations, we have the
discretion to delay allocation and distribution of any and all shares to
shareholders who are affected by such regulations and elect to participate in
the rights offering, including shares that we issue with respect to your basic
or over-subscription privilege in order to comply with state securities laws. If
you request and pay for more shares than are allocated to you, we will refund
that overpayment, without interest.

Subscription Cards and Termination Date

Subscription cards, which indicate the number of shares you will be
guaranteed the right to purchase, will be issued in the name and address of the
holders of common stock of record on , 2002 and mailed to holders as soon as
practicable after the record date. The offering will end at 4:30 P.M. New York
City Time, on , 2002. The date and time when the offering expires is herein
referred to as the "expiration date."

The American Stock Transfer & Trust Company, our subscription agent,
will hold all subscriptions received prior to the expiration date. Prior to the
formal acceptance of the subscriptions, American Stock Transfer will hold all
payments. Subscriptions may be revoked by delivery of written notice of
revocation to us prior to the expiration date. Subscriptions will be accepted,
if at all, promptly after the expiration date by our delivery of written
confirmation of acceptance to American Stock Transfer authorizing the issuance
of the shares and the payment of any refunds, without interest, to the extent
that the offering is oversubscribed. We reserve the right to reject any
subscription, absent proof in writing from you that all terms of the offering
have been complied with on a timely basis. We will notify the subscriber
promptly of any rejection.

You may not purchase fractional shares, and only whole shares will be
issued. The purchase price will be $ per share for each share and the right to
purchase shares is nontransferable.

Determination of Subscription Price; No Board Recommendation

In establishing the offering price, our directors considered recent
market prices for our stock. The purchase price has been set by the directors at
a discount to the current market price and is intended, therefore, by the
directors to be attractive to our shareholders. The purchase price does not
reflect our assessment of the actual value of our assets. Our Board of Directors
is not making any recommendation as to whether you should exercise your
subscription rights. You should make your decision based on your own assessment
of your best interests after reading this prospectus. All interpretations of
matters relating to the offering will be made by our management and will be
final.

How to Purchase Shares

After the date of this prospectus, ________, 2002, shares may be
purchased by delivering the subscription card, along with a signed subscription
agreement, together with full payment of the purchase price for both the
shareholder's guaranteed and contingent amounts. Payment of the purchase price
must be made by check, bank draft or money order payable to the order of
"American Stock Transfer - AS SUBSCRIPTION AGENT". Any subscriptions satisfying
these conditions will be accepted; however, subscriptions received after the
expiration date will not be honored and we will not be responsible for
subscriptions not delivered by that time. You are advised to choose a reliable
method (e.g., such as overnight courier service) for the delivery of your
subscriptions to American Stock Transfer.

You may also subscribe by delivering to American Stock Transfer before
the expiration date each of the following:

o the full purchase price, together with a signature guarantee
in writing or by facsimile from a bank or trust company or a
member firm of any U.S. registered stock exchange that a
subscription card with respect to shares subscribed for has
been or will be promptly delivered to American Stock Transfer
within three business days, and

o information setting forth the name of the subscriber and the
serial number of the subscription card. Subscriptions
satisfying these conditions will be accepted subject to prompt
receipt by American Stock Transfer of the duly executed
subscription card within three business days.

Registration of the Shares You Purchase

We have made application for the registration of the common stock being
offered under the applicable securities laws of each of the United States which
do not provide an exemption. In the event that the offering is not permitted
under the law of any state or states, or in the event that qualification of the
securities in any state or states would prove to be impracticable in the
judgment of management, we will not issue subscription cards to shareholders in
those states.

CERTAIN MATERIAL TAX CONSIDERATIONS

Certain Tax Consequences of the Offering

Your receipt of your subscription rights will have certain federal
income tax consequences. This discussion is not intended to serve as tax advice
to you, and we encourage you to consult your personal tax advisor for advice
relating to your personal tax situation.

The mere receipt of the subscription rights will not result in the
recognition of taxable income. While you will not have to report taxable income
upon the receipt of your subscription rights, you may have to allocate a portion
of the adjusted basis of your original shares to any shares that you purchase in
the offering.

If you do not exercise your subscription rights, you will not be
allowed to claim a loss, and no adjustment will be made to the tax basis of your
shares. If the subscription rights are exercised, you may be required to
allocate a portion of the basis of your original shares to the shares that you
purchase in the offering, depending on whether the fair market value of the
rights equals or exceeds 15% of the fair market value of your original shares on
the date of distribution of your rights.

If you exercise your subscription rights and the fair market value of
your subscription rights on the date of distribution is 15% or more of the fair
market value of the shares you own on that date, you must allocate to the
purchased shares that part of the basis of your original shares that is
attributable to each subscription right that you exercise. The basis of your
original shares that is allocated to your subscription rights will equal your
basis in your original shares multiplied by a fraction the numerator of which is
the fair market value of your subscription rights and the denominator of which
is the total of the fair market value of your original shares and the fair
market value of your subscription rights. The basis of your original shares that
is allocated to each subscription right that you exercise will equal the basis
of your original shares that is allocated to your subscription rights divided by
the total number of subscription rights issued to you. Accordingly, the tax
basis of each share that you purchase will equal the basis of your original
shares that is allocated to each subscription right that you exercise plus the
purchase price of each purchased share. The holding period for a share acquired
by exercise of a subscription right will begin from the date the subscription
right is exercised. The basis of your original shares will be correspondingly
reduced by the portion of the basis in your original shares that is allocated to
the purchased shares.

If you exercise your subscription rights and the fair market value of
the subscription rights on the date of distribution is less than 15% of the fair
market value of the shares you own on that date, you may elect to allocate a
portion of your current tax basis to the shares that you purchase as discussed
above. If you do not elect to allocate your tax basis, then your tax basis in
the purchased shares will be your purchase price of the offered stock.

Passive Foreign Investment Company Rules

The Internal Revenue Code of 1986, as amended, provides special rules for
distributions received by U.S. holders on stock of a passive foreign investment
company (PFIC), as well as amounts received from the sale or other disposition
of PFIC stock.

Under the PFIC rules, a non-U.S. corporation will be classified as a PFIC
for U.S. federal income tax purposes in any taxable year in which, after
applying certain look-through rules, either (1) at least 75 percent of its gross
income is passive income or (2) at least 50 percent of the gross value of its
assets is attributable to assets that produce passive income or are held for the
production of passive income.

Passive income for this purpose generally includes dividends, interest,
royalties, rents, and gains from commodities and securities transactions.
Special rules apply in cases where a foreign corporation owns directly or
indirectly at least a 25 percent interest in a subsidiary, measured by value. In
this case, the foreign corporation is treated as holding its proportionate share
of the assets of the subsidiary and receiving directly its proportionate share
of the income of the subsidiary when determining whether it is a PFIC. Thus,
Coastal Caribbean would be deemed to receive its pro rata share of the income
and to hold its pro rata share of the assets, of Coastal Petroleum.

Based on certain estimates of its gross income and gross assets
and the nature of its business, Coastal Caribbean would be classified as a PFIC
for the years 1987 through 2001. Once an entity is considered a PFIC for a
taxable year, it will be treated as such for all subsequent years with respect
to owners holding the stock in a year that it was classified as a PFIC under the
income or asset test described above. Whether the Company will be a PFIC under
either of these tests in future years will be difficult to determine because the
tests are applied annually. Based upon Coastal Caribbean's current passive
income, it is likely that Coastal Caribbean will be classified as a PFIC in
2002.

If Coastal Caribbean is classified as a PFIC with respect to a U.S. holder
any gain from the sale of, and certain distributions with respect to, shares of
our common stock, would cause a U.S. holder to become liable for U.S. federal
income tax under Code section 1291 (the interest charge regime). The tax is
computed by allocating the amount of the gain on the sale or the amount of the
distribution, as the case may be, to each day in the U.S. shareholder's holding
period. To the extent that the amount is allocated to a year, other than the
year of the disposition or distribution, in which the corporation was treated as
a PFIC with respect to the U.S. holder, the income will be taxed as ordinary
income at the highest rate in effect for that year, plus an interest charge. The
interest charge would generally be calculated as if the distribution or gain had
been recognized ratably over the U.S. holder's holding period (for PFIC
purposes) for the shares. To the extent an amount is allocated to the year of
the disposition or distribution, or to a year before the first year in which the
corporation qualified as a PFIC, the amount so allocated is included as
additional gross income for the year of the disposition or distribution. A U.S.
holder also would be required to make an annual return on IRS Form 8621 that
describes any distributions received with respect to our shares and any gain
realized on the sale or other disposition of our shares.

As an alternative to taxation under the interest charge regime, a U.S.
holder generally can elect, subject to certain limitations, to annually take
into gross income the appreciation or depreciation in our common shares' value
during the tax year (mark-to-market election). If a U.S. holder makes the
mark-to-market election, the U.S. holder will not be subject to the
above-described rule. Instead, if a U.S. holder makes the mark-to-market
election, the U.S. holder recognizes each year an amount equal to the difference
as of the close of the taxable year between the U.S. holder's fair market value
of the common shares and the adjusted basis in the common shares. Losses would
be allowed only to the extent of net gain previously included by the U.S. holder
under the mark-to-market election for prior taxable years. Amounts included in
or deducted from income under the mark-to-market election and actual gains and
losses realized upon the sale or disposition of the common shares, subject to
certain limitations, will be treated as ordinary gains or losses. If the
mark-to-market election is made for a year other than the first year in the U.S.
holder's holding period in which the corporation was a PFIC, the first year's
mark-to-market inclusion, if any, is taxed as if it were a distribution subject
to the interest charge regime discussed above.

Another alternative election which would allow a U.S. holder to elect to
take its pro rata share of Coastal Caribbean's undistributed income into gross
income as it is earned by Coastal Caribbean (QEF election) would only be
available to a U.S. holder if Coastal Caribbean provided certain information to
the shareholders of Coastal Caribbean. Coastal Caribbean has had no
undistributed income for the years 1987 through 2001. If the QEF election is
made in a year other than the first year of the U.S. holder's holding period in
which the foreign corporation is a PFIC, both the QEF regime and interest charge
regime can apply, unless a special election is made. Under this special
election, the taxpayer is treated as if it disposed of its PFIC stock in a
transaction subject to the interest charge rules to the extent gain is deemed to
be recognized. Once this election is made, the holder will be subject only to
the QEF regime.

LEGAL MATTERS

Murtha Cullina LLP, Hartford, Connecticut, has passed upon legal
matters relating to U. S. law in connection with this offering. Mr. Timothy L.
Largay, a director and officer of the Company, is a partner of Murtha Cullina
LLP. Mr. Largay owns shares of our common stock, has options to purchase shares
of our common stock (See Security Ownership of Management) and Murtha Cullina
has a contingency fee in the Florida Litigation (See Legal Proceedings).

All matters relating to Bermuda law affecting Coastal Caribbean and its
common stock have been passed upon by the firm of Conyers Dill & Pearman,
Hamilton, Bermuda, of which firm Mr. Collis, a director and Secretary of Coastal
Caribbean, is a partner. Mr. Dill, a director, is a consultant to the firm of
Conyers Dill & Pearman. Both Messrs. Dill and Collis own shares of our common
stock and have options to purchase shares of our common stock (See Security
Ownership of Management).

The firm of Angerer & Angerer, Tallahassee, Florida, has passed upon
all matters relating to litigation in which Coastal Petroleum has been involved
until December 31, 2000. Mr. Angerer has a contingency fee in the Florida
Litigation (See Legal Proceedings).

The firm of Gaylord Merlin Ludovici Diaz & Bain, Tampa, Florida, has
passed upon all matters relating to litigation filed in Florida Circuit Court
pertaining to the taking case in which Coastal Petroleum has been involved since
January 1, 2001. Gaylord Merlin Ludovici Diaz & Bain has a contingency fee in
the Florida Litigation (See Legal Proceedings).

Murtha Cullina LLP may rely, insofar as Bermuda law is concerned, on
the opinion of Bermuda counsel, and insofar as litigation is involved, on the
opinions of Angerer & Angerer and Gaylord Merlin Ludovici Diaz & Bain.

EXPERTS

The consolidated financial statements of Coastal Caribbean Oils &
Minerals, Ltd. (a development stage company) at December 31, 2001 and 2000, for
each of the three years in the period ended December 31, 2001 and for the period
from January 31, 1953 (inception) to December 31, 2001 appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon, (which contains an
explanatory paragraph describing conditions that raise substantial doubt about
Coastal Caribbean's ability to continue as a going concern as described in Note
1 to the consolidated financial statements) appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We are a public company and file annual, quarterly and special reports
and other information with the SEC. You may read and copy any documents we file
at the SEC's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain further information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. You can obtain copies of
this material from the Public Reference Section of the SEC, Washington, D.C.
20549, at prescribed rates. Our reports, proxy and information statements and
other information are also available to the public at the SEC's web site. The
Internet address of that site is http://www.sec.gov.

Our common stock is listed on the Boston Stock Exchange and reports,
proxy statements and other information can also be examined at that exchange.

This prospectus is only part of a registration statement on Form S-1
that we have filed with the SEC under the Securities Act and therefore omits
certain information contained in the registration statement. We have also filed
exhibits and schedules with the registration statement that are excluded from
this prospectus, and you should refer to the applicable exhibit or schedule for
a complete description of any statement referring to any contract or other
document. You may inspect a copy of the registration statement, including the
exhibits and schedules, without charge at the SEC's public reference room or
through its web site.

INDEX TO FINANCIAL STATEMENTS

Page Reference
--------------

Report of Independent Auditors. F-2

Consolidated balance sheets at December 31, 2001 and 2000. F-3

Consolidated statements of operations for each of the three years in
the period ended December 31, 2001 and for the period from January 31,
1953 (inception) to December 31, 2001. F-4

Consolidated statements of cash flows for each of the three years in
the period ended December 31, 2001 and for the period from January 31,
1953 (inception) to December 31, 2001. F-5

Consolidated statement of common stock and capital in excess of
par value for the period from January 31, 1953 (inception) to
December 31, 2001. F-6

Notes to consolidated financial statements. F-7

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Coastal Caribbean Oils & Minerals, Ltd.

We have audited the accompanying consolidated balance sheets of Coastal
Caribbean Oils & Minerals, Ltd. (a development stage company) as of December 31,
2001 and 2000, and the related consolidated statements of operations, cash
flows, and common stock and capital in excess of par value for each of the three
years in the period ended December 31, 2001 and for the period from January 31,
1953 (inception) to December 31, 2001. 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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the 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. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Coastal
Caribbean Oils & Minerals, Ltd. at December 31, 2001 and 2000, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 2001 and for the period from January 31,
1953 (inception) to December 31, 2001 in conformity with accounting principles
generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As more fully described in
Notes 1 and 4 to the consolidated financial statements, the Company has a
limited amount of working capital, has incurred recurring losses and has a
deficit accumulated during the development stage. In addition, the Company has
been and continues to be involved in several legal proceedings against the State
of Florida which has limited the Company's ability to commence development
activities on its unproved oil or gas properties or obtain compensation for
certain property rights it believes have been confiscated. These situations
raise substantial doubt about the Company's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or amounts and classification of liabilities that may result from the
outcome of these uncertainties.

As more fully described in Note 1, the Company restated certain amounts
previously reported as of and for the year ended December 31, 2000 and for the
period from January 31, 1953 (inception) to December 31, 2000.

/s/ Ernst & Young LLP

Stamford, Connecticut
March 8, 2002

COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company

CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)

December 31,
--------------- -----------------
2001 2000
--------------- -----------------
(Restated)
ASSETS
Current assets:

Cash and cash equivalents $ 609,024 $ 2,958,674
Interest and accounts receivable 8,604 41,520
Notes receivable 15,000 -
Prepaid expenses 353,596 323,897
------- ---------
Total current assets 986,224 3,324,091
------- ---------

Unproved oil, gas and mineral properties
(full cost method) - 4,144,682

Contingent litigation claim (Note 4) - -

Other assets 90,391 27,866
---------- ----------
Total assets $1,076,615 $7,496,639
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accrued liabilities $ 358,621 $ 193,176
---------- ----------

Minority interests - -

Shareholders' equity:
Common stock, par value $.12 per share:
Authorized - 250,000,000 shares
Outstanding - 43,468,329 shares 5,216,199 5,216,199
Capital in excess of par value 31,497,362 31,497,362
---------- ----------
36,713,561 36,713,561
Deficit accumulated during the development stage (35,995,567) (29,410,098)
------------ ------------
Total shareholders' equity 717,994 7,303,463
---------- ----------
Total liabilities and shareholders' equity $1,076,615 $7,496,639
========== ==========

See accompanying notes.

COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company

CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)

For the
period from
Jan. 31, 1953
(inception)
Years ended December 31, to
------------------------
2001 2000 1999 Dec. 31, 2001
------- ----------- --------- -----------------
(Restated)

Interest and other income $78,432 $62,544 $55,275 $3,869,555
------- ------- ------- ----------

Expenses:
Legal fees and costs 1,670,446 633,521 405,380 14,680,959
Administrative expenses 533,579 535,325 474,027 8,407,240
Salaries 151,800 151,800 157,550 3,372,428
Shareholder communications 105,863 107,852 102,825 3,885,495
Write off of unproved properties 4,201,733 - - 5,501,247
Exploration costs 480 19,598 20,954 188,218
Lawsuit judgments - - - 1,941,916
Minority interests - - - (632,974)
Other - - - 364,865
Contractual services - - - 2,155,728
------------ ------------ ------------ ---------
6,663,901 1,448,096 1,160,736 39,865,122
--------- --------- --------- ----------

Net loss $(6,585,469) $(1,385,552) $(1,105,461)
============ ============ ============

Deficit accumulated during the
development stage $(35,995,567)
============

Net loss per share based on average
number of shares outstanding during
the period:
Basic and diluted EPS $(.15) $(.03) $(.03)
====== ====== ======

Average number of shares outstanding
(basic and diluted) 43,468,329 40,843,736 40,056,358
========== ========== ==========

See accompanying notes.

COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. dollars)

For the period from
Jan. 31, 1953
(inception)
Years ended December 31, to
------------------------
2001 2000 1999 Dec. 31, 2001
------------- ------------ ------------ ------------------

(Restated)
Operating activities:

Net loss $(6,585,469) $(1,385,552) $(1,105,461) $(35,995,567)
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interest - - - (632,974)
Write off of unproved properties 4,201,733 - - 5,501,247
Common stock issued for services - - - 119,500
Compensation recognized for stock option grant - 75,000 - 75,000
Recoveries from previously written off properties - - 252,173
Net change in:
Interest and accounts receivlables 32,916 (15,937) 27,051 (8,604)
Prepaid expenses (29,699) 28,192 (37,809) (353,596)
Accrued liabilities 165,445 124,752 1,125 358,621
Other assets (62,525) (421) (247) (90,391)
----------- ----------- ------------ ------------
Net cash used in operating activities (2,277,599) (1,173,966) (1,115,341) (30,774,591)
----------- ----------- ----------- ------------

Investing activities:
Additions to oil, gas, and mineral properties
net of assets acquired for common stock and
reimbursements (57,051) (48,190) (23,913) (3,621,688)
Proceeds from relinquishment of surface rights - - - 246,733
Marketable securities (net) - 390,941 1,737,898 -
Notes receivable (15,000) - - (15,000)
Purchase of fixed assets - - (61,649)
-------- -------- ---------- ----------
-
Net cash provided by (used in) investing activities (72,051) 342,751 1,713,985 (3,451,604)
-------- ------- --------- -----------

Financing activities:
Sale of common stock net of expenses - 3,138,765 - 29,480,970
Shares issued upon exercise of options - - - 884,249
Sale of shares by subsidiary - - - 750,000
Sale of subsidiary shares 3,720,000
----------- ------------ ----------- ---------
- - -
Net cash provided by financing activities 3,138,765 34,835,219
------------ --------- ----------- ----------
- -
Net increase (decrease) in cash and cash equivalents (2,349,650) 2,307,550 598,644 609,024
Cash and cash equivalents at beginning of period 2,958,674 651,124 52,480 -
------------ -------------- ------------ -----------
Cash and cash equivalents at end of period $ 609,024 $ 2,958,674 $ 651,124 $ 609,024
============ ============ ========== ==========

See accompanying notes.

COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company

CONSOLIDATED STATEMENT OF COMMON STOCK
AND CAPITAL IN EXCESS OF PAR VALUE
(Expressed in U.S. dollars)
For the period from January 31, 1953 (inception) to December 31, 2001

Capital in
Number of Common Excess
Shares Stock of Par Value
------ ----- ------------
Shares issued for net assets and unrecovered costs

at inception 5,790,210 $ 579,021 $ 1,542,868
Shares issued upon sales of common stock 26,829,486 3,224,014 16,818,844
Shares issued upon exercise of stock options 510,000 59,739 799,760
Market value ($2.375 per share) of shares issued in
1953 to acquire an investment 54,538 5,454 124,074
Shares issued in 1953 in exchange for 1/3rd of a 1/60th
overriding royalty (sold in prior year) in nonproducing
leases of Coastal Petroleum 84,210 8,421 -
Market value of shares issued for services rendered
during the period 1954-1966 95,188 9,673 109,827
Net transfers to restate the par value of common stock
outstanding in 1962 and 1970 to $0.12 per share - 117,314 (117,314)
Increase in Company's investment (equity) due to
capital transactions of Coastal Petroleum in 1976 - - 117,025
---------- --------- ----------
Balance at December 31, 1990 33,363,632 4,003,636 19,395,084
Sale of subsidiary shares - - 300,000
---------- --------- ----------
Balance at December 31, 1991 33,363,632 4,003,636 19,695,084
Sale of subsidiary shares - - 390,000
---------- --------- ----------
Balance at December 31, 1992 33,363,632 4,003,636 20,085,084
Sale of subsidiary shares - - 1,080,000
---------- --------- ----------
Balance at December 31, 1993 33,363,632 4,003,636 21,165,084
Sale of subsidiary shares - - 630,000
---------- --------- ----------
Balance at December 31, 1994 33,363,632 4,003,636 21,795,084
Sale of subsidiary shares - - 600,000
---------- --------- ----------
Balance at December 31, 1995 33,363,632 4,003,636 22,395,084
Sale of common stock 6,672,726 800,727 5,555,599
Sale of subsidiary shares - - 480,000
Exercise of stock options 10,000 1,200 12,300
---------- --------- ----------
Balance at December 31, 1996 40,046,358 4,805,563 28,442,983
Sale of subsidiary shares - - 240,000
Exercise of stock options 10,000 1,200 10,050
---------- --------- ----------
Balance at December 31, 1997, 1998, 1999 40,056,358 4,806,763 28,693,033
Sale of common stock 3,411,971 409,436 2,729,329
Compensation recognized for stock option grant - 75,000
---------- --------- ----------
Balance at December 31, 2000 and 2001 43,468,329 $ 5,216,199 $ 31,497,362
========== =========== ============
See accompanying notes.

COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 2001

1. Summary of significant accounting policies
------------------------------------------

Consolidation
-------------

The accompanying consolidated financial statements include the accounts
of Coastal Caribbean Oils & Minerals, Ltd. (Coastal Caribbean) and its majority
owned subsidiary, Coastal Petroleum Company (Coastal Petroleum), referred to
collectively as the Company. The Company, which has been engaged in a single
industry and segment, is considered to be a development stage company since its
exploration for oil, gas and minerals has not yielded any significant revenue or
reserves. During the year 2001, the Company concluded that the value of its
leases has been taken and its property interests were impaired by the actions
taken by the State of Florida and therefore, has recorded an impairment charge
to reflect the write off of the costs of unproved oil, gas and minerals
properties. See Note 4. Litigation. All intercompany transactions have been
eliminated.. Certain prior year amounts have been reclassified to conform with
the current year presentation.

Cash and cash equivalents
-------------------------

The Company considers all highly liquid short-term investments with
maturities of three months or less at the date of acquisition to be cash
equivalents. Cash and cash equivalents are carried at cost which approximates
market value. The components of cash and cash equivalents are as follows:

December 31,
------------
2001 2000
---- ----
Cash $ 111,682 $ 159,834
Federal Home Loan Bank discount notes 497,342 2,798,840
------- ---------
$ 609,024 $ 2,958,674
========= ===========

Use of Estimates
----------------

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. The outcome of the litigation
and the ability to develop the Company's oil and gas properties will have a
significant effect on the Company's financial position and results of
operations. Actual results could differ from those estimates.

Unproved Oil, Gas and Mineral Properties
---------------------------------------

The Company follows the full cost method of accounting for its oil and
gas properties. All costs associated with property acquisition, exploration and
development activities whether successful or unsuccessful are capitalized. Since
the Company's properties were undeveloped and nonproducing and the subject of
litigation, capitalized costs were not being amortized.

The capitalized costs are subject to a ceiling test which basically
limits such costs to the aggregate of the estimated present value discounted at
a 10% rate of future net revenues from proved reserves, based on current
economic and operating conditions, plus the lower of cost or fair market value
of unproved properties.

The Company assesses whether its unproved properties are
impaired on a periodic basis. This assessment is based upon work completed on
the properties to date, the expiration date of its leases and technical data
from the properties and adjacent areas. These properties are subject to
extensive litigation with the State of Florida.

COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 2001

1. Summary of significant accounting policies (Cont'd)
---------------------------------------------------

During the year 2001, the Company concluded that the value of its leases
has been taken and its property interests were impaired by the actions taken by
the State of Florida and therefore, has recorded an impairment charge to reflect
the write off of the costs of unproved oil, gas and minerals properties See Note
4. Litigation. All future costs incurred in connection with the Company's
Florida leases will be expensed as incurred. During 2001, the Company restated
the deficit accumulated during the development stage to reflect a write off of
certain costs accumulated at December 31, 1960 attributable to dry holes on
abandoned leases as follows:

Deficit accumulated during the development stage
Balance at December 31, 2000 as previously reported $28,747,058
Write off of unproved properties 663,040
-----------
Balance at December 31, 2000 as restated $29,410,098
-----------

Sale of Subsidiary Shares
-------------------------

All amounts realized from the sale of Coastal Petroleum shares have
been credited to capital in excess of par value.

Loss Per Share
--------------

Loss per common share is based upon the weighted average number of
common and common equivalent shares outstanding during the period. The Company's
basic and diluted calculations of EPS are the same because the exercise of
options is not assumed in calculating diluted EPS, as the result would be
anti-dilutive (the Company has continuing losses).

Financial Instruments
---------------------

The carrying value for cash and cash equivalents, accounts receivable,
marketable securities and accounts payable approximates fair value based on
anticipated cash flows and current market conditions.

Going Concern
-------------

The Company has a limited amount of working capital, has incurred recurring
losses and has a deficit accumulated during the development stage. Furthermore,
as discussed in Note 4, on January 16, 2001, Coastal Petroleum Company filed a
complaint in the Leon County Circuit Court in Florida against the State of
Florida seeking compensation for the State's taking of its property rights to
explore for oil and gas within its Lease 224-A. On November 27, 2001, the Leon
County Circuit Court set a trial date for two weeks beginning September 30, 2002
for Coastal Petroleum's lawsuit against the State of Florida. The cost of that
litigation has been substantial and will require the Company to obtain
additional capital. On January 10, 2002, the Company filed a registration
statement for the sale of its common stock, which has not yet been declared
effective by the Securities and Exchange Commission. The terms of the offering
have not yet been determined. There can be no assurances that funds on hand or
realized or realizable on the sales of the Company's shares described in Note 5
will be sufficient to allow the Company to survive until such litigation is
concluded. The Company believes the funds on hand at December 31, 2001 are
sufficient to pay the expenses associated with the proposed rights offering and
to fund the Company's operations through the second quarter of 2002. In
addition, an estimated minimal amount of $500,000 would be necessary to fund the
Company's operations through December 31, 2002. . In addition, an estimated
minimum amount of $500,000 would be necessary to fund the Compan's operations
through December 31, 2002. In the event that the offering of the Company's
common stock is inadequate to fund the Company's capital needs, the Company
intends to explore other possible funding sources, particularly the other
shareholders of Coastal Petroleum. These situations raise substantial doubt
about the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or amounts and
classification of liabilities that may result from the outcome of these
uncertainties.

COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 2001

1. Summary of significant accounting policies (Cont'd)
---------------------------------------------------

Company believes the funds on hand at December 31, 2001 are sufficient to pay
the expenses associated with the proposed offering and to fund the Company's
operations through the second quarter of 2002. These situations raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or amounts and classification of liabilities that may result from the outcome of
these uncertainties.

2. Coastal Petroleum Company - Minority Interests
----------------------------------------------

In 1992, Coastal Caribbean granted Lykes Minerals Corp. (Lykes), a
wholly owned subsidiary of Lykes Bros. Inc., an option to acquire 78 shares of
Coastal Petroleum at $40,000 per share. Lykes exercised all of its options to
purchase Coastal Petroleum shares at a total cost of $3,120,000 and as of
December 31, 2001 and 2000, held 26.7% of Coastal Petroleum.

The Lykes agreement provides that Lykes is entitled to exchange each
Coastal Petroleum share for 100,000 Coastal Caribbean shares, subject to
adjustment for dilution and other factors. If fully exercised, that entitlement
would leave Lykes with about 15% of Coastal Caribbean's outstanding shares.
Lykes also has the right to exchange Coastal Petroleum shares for overriding
royalty interests in Coastal Petroleum's properties. If Lykes were to exchange
its 26.7% interest in Coastal Petroleum for a royalty interest, its overriding
royalty interest in Coastal Petroleum's working-interest acreage would be 3.3%.

As of December 31, 2001 and 2000, Coastal Petroleum shares were owned as
follows:
Shares %
------ ------
Coastal Caribbean 173 59.3
Lykes 78 26.7
Others 41 14.0
---- -----
292 100.0
==== =====

Coastal Caribbean has been making loans to Coastal Petroleum, its
majority owned subsidiary, in order for Coastal Petroleum to continue the
Florida Litigation and pay its operating expenses. At December 31, 2001, the
amount of these loans totaled $20,826,287 and the accumulated interest on the
loans totaled $5,758,768 for a total indebtedness of $26,585,055. All such loans
and interest have been eliminated in consolidation, as Coastal Caribbean is
required to record 100% of the losses of Coastal Petroleum because the minority
interests have been fully liquidated and have no further obligation to fund
Coastal Petroleum.

3. Unproved oil, gas and mineral properties
----------------------------------------

Coastal Petroleum holds three unproved and nonproducing oil, gas and
mineral leases granted by the Trustees of the Internal Improvement Fund of the
State of Florida (Trustees). These leases cover submerged

COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 2001

3. Unproved oil, gas and mineral properties (Cont'd)
-------------------------------------------------

and unsubmerged lands, principally along the Florida Gulf Coast, and certain
inland lakes and rivers throughout the State.

The two leases bordering the Gulf Coast have been divided into three
areas, each running the entire length of the coastline from Apalachicola Bay to
the Naples area. Coastal Petroleum has certain royalty interests in the inner
area, no interest in the middle area and a 100% working interest in the outside
area.

Coastal Petroleum also has a 100% working interest in Lake Okeechobee,
and a royalty interest in other areas. Coastal Petroleum has agreed not to
conduct exploration, drilling, or mining operations on said lake, except with
prior approval of the Trustees.

The three leases have a term of 40 years from January 6, 1976 and
require the payment of annual lease rentals of totaling $59,247; if oil, gas or
minerals are being produced in economically sustainable quantities at January 6,
2016, these operations will be allowed to continue until they become uneconomic.
The drilling requirements are governed by Chapter 20680, Laws of Florida, Acts
of 1941. Under the 1941 Act, a lessee is required to drill at least one test
well on lands leased in each five year period under the term of the lease. The
Company believes that it is current in fulfilling its drilling requirements.

The working interest areas of the three leases are subject to royalties
payable to the Trustees of 12 1/2% on oil and gas, $.50 per long ton of sulfur
and 10% on other minerals. The leases are subject to additional overriding
royalties which aggregate 1/16th as to oil, gas and sulfur and 13/600th as to
other minerals.

During the year 2001, the Company concluded that its property interests
were impaired by the actions taken by the State of Florida and therefore,
recorded an impairment charge in the amount of $4,201,733 to reflect the write
of the costs of unproved oil, gas and minerals properties. See Note 4.
Litigation. Although these costs have been written off, the Company still has
legal title to the leases and will continue to pay annual lease rentals on the
leases. The following is a summary of the cost of unproved oil, gas and mineral
properties at December 31, 2000 and 1999, accounted for under the full cost
method, all of which are located in Florida:

2000 1999
---------- ---------
(Restated) (Restated)

Lease acquisition costs $ 877,797 $ 877,797
Lease and royalty costs (principally legal fees) 585,348 585,348
Lease rentals 2,485,138 2,425,892
Other exploratory expenses 1,228,510 1,239,566
Salaries 457,708 457,708
--------- ----------
5,634,501 5,586,311
--------- ----------
Deduct:
Reimbursement for lease rentals and other expenses 1,243,085 1,243,085
Proceeds from relinquishment of surface rights 246,733 246,733
--------- ----------
1,489,819 1,489,819
--------- ----------
Total unproved oil, gas and mineral properties $4,144,682 $4,096,492
========== ==========

COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 2001

4. Litigation
----------

Florida Litigation
------------------

Coastal Petroleum has been involved in various lawsuits for many years.
Coastal Petroleum's current litigation (Florida Litigation) now involves
one basic claim: whether the State's offshore drilling policy and its denial of
a permit constitute a taking of Coastal Petroleum's property. In addition,
Coastal Caribbean is a party to another action in which Coastal Caribbean claims
that certain of its royalty interests have been confiscated by the State.

In 1990, the State of Florida enacted legislation that prohibits
drilling or exploration for oil or gas on Florida's offshore acreage. Although
the law does not apply to areas where Coastal Petroleum is entitled to conduct
exploration, the State of Florida has effectively prevented any exploratory
drilling by denying the Company's application for drilling permits. In addition,
in those areas where Coastal Petroleum has only a royalty interest, the law also
effectively prohibits production of oil and gas, rendering it impossible for
Coastal Petroleum to collect royalties from those areas. During 1998, Coastal
Petroleum exhausted its legal remedies in its efforts to obtain compensation for
the drilling prohibition on its royalty interest acreage.

Lease Taking Case
-----------------

On June 26, 2000, the First District Court of Appeal affirmed an
earlier ruling that the Florida Department of Environmental Protection (DEP)
could deny Coastal Petroleum a permit to drill an exploratory well about nine
miles south of St. George Island in the Florida Panhandle. While the appeals
court held that the DEP could take such action on the basis of a compelling
public purpose in not allowing offshore oil and gas drilling in Florida, the
court also found that the DEP's action would be unconstitutional "if just
compensation is not paid for what is taken." The appeals court stated that
whether the denial of the permit constituted a taking of Coastal Petroleum's
property should be determined by the Circuit Court.

On January 16, 2001, Coastal Petroleum filed a complaint in the Leon
County Circuit Court in Florida against the State of Florida seeking
compensation for the State's taking of its property rights to explore for oil
and gas within its Lease 224-A.

COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 2001

4. Litigation (Cont'd)
-------------------

On March 5, 2001, the State filed a Motion to Dismiss Coastal
Petroleum's complaint, which was denied by the court on April 26, 2001. After
the Motion was denied, discovery, which had been suspended pending the outcome
of the Motion to Dismiss, resumed. Some depositions have now been taken,
documents have been exchanged and discovery is expected to continue until the
court ordered cutoff date of August 25, 2002.

On November 27, 2001, the Leon County Circuit Court set a trial date
for two weeks beginning September 30, 2002 for Coastal Petroleum's lawsuit
against the State of Florida. If the Court rules in Coastal Petroleum's favor,
there will then be a second trial before a jury to determine the amount of
compensation to be awarded. Both the decision of the Court and any decision of a
jury are subject to appeals by any of the parties to the litigation.

Royalty Taking Case
-------------------

The offshore areas covered by Coastal Petroleum's original leases
(prior to the 1976 Settlement Agreement) are subject to certain other royalty
interests held by third parties, including Coastal Caribbean. In 1994, several
of those third parties, including Coastal Caribbean which has approximately a
12% interest in any recovery, have instituted a separate lawsuit against the
State. That lawsuit claims that the royalty holders' interests have been
confiscated as a result of the State's actions discussed above and that they are
entitled to compensation for that taking. The royalty holders were not parties
to the 1976 Settlement Agreement, and the royalty holders contend that the terms
of the Settlement Agreement do not protect the State from taking claims by those
royalty holders. The case is currently pending before the Circuit Court in
Tallahassee. On December 2, 1999, the Circuit Court denied the State's motion to
dismiss the plaintiffs' claim of inverse condemnation but dismissed several
other claims.

On May 10, 2000, the State filed a motion for summary judgment but no
hearing date has been set for the motion. Discovery is proceeding.

Any recovery made in the royalty holders' lawsuit would be shared among
the various plaintiffs in that lawsuit, including Coastal Caribbean, but not
Coastal Petroleum.

Counsel
-------

The Tampa, Florida law firm of Gaylord Merlin Ludovici Diaz & Bain
(Gaylord Merlin) is Coastal Petroleum's principal trial counsel in Coastal
Petroleum's inverse condemnation claim against the State of Florida

COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 2001

4. Litigation (Cont'd)
-------------------

in Florida Circuit Court. Mr. Cary Gaylord is the lead attorney for Gaylord
Merlin. In addition, the law firm of Angerer & Angerer of Tallahassee, Florida
is assisting Gaylord Merlin in the litigation.

Statutory Attorneys' Fees
-------------------------

1. Thirty-three percent of any difference up to $250,000; plus
2. Twenty-five percent of any portion of the difference between $250,000
and $1 million; plus
3. Twenty percent of any portion of the difference exceeding $1 million.
..
Contingency Fees
----------------

Coastal Petroleum has agreed to pay an aggregate of 8.65% in contingent
fees based on any net recovery from execution on or satisfaction of judgment or
from settlement of the Florida litigation to various law firms and current or
former officers of the Company.

The following contingencies have been granted to related parties:

Relationship to Net
Coastal Petroleum Recovery
Holder at Date of Grant Percentage
------ ---------------- ----------
Benjamin W. Heath Chairman of the Board 1.25
Phillip W. Ware President 1.25
Murtha Cullina LLP Counsel 1.00
James R. Joyce Assistant Treasurer .30
----
Total 3.80
====

In addition, Coastal Petroleum has agreed to pay Gaylord Merlin a
contingent fee equal to the greater of:

(a) approximately 90% of the statutory award of attorneys' fees
(discussed above), less the hourly fees paid to Gaylord
Merlin, or

COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 2001

4. Litigation (Cont'd)
-------------------

Uncertainty
-----------

Coastal Petroleum or Coastal Caribbean may not prevail on any of the
issues set forth above and may not recover compensation for any of their claims.
In addition, even if Coastal Petroleum were to prevail on any or all of the
issues to be decided, Coastal Caribbean or Coastal Petroleum may not have
sufficient financial resources to survive until such decisions become final. In
the event that the State of Florida were to grant a permit to drill any wells
for which applications have been filed, the wells drilled may not be successful
and lead to production of any oil or gas in commercial quantities.

5. Common Stock
------------

The Company's Bye-Law No. 1 provides that any matter to be voted upon
must be approved not only by a majority of the shares voted at such meeting, but
also by a majority in number of the shareholders present in person or by proxy
and entitled to vote thereon.

The Company has been financing its operations primarily from sales of
its common stock and sales of shares of Coastal Petroleum (See Note 2).

On October 23, 2000, the Company completed the sale of 3,411,971 shares
of its common stock to its shareholders at $1.00 per share. The net proceeds to
the Company were $3,138,765 after deducting the $273,206 cost of the offering.

On January 10, 2002, the Company filed a registration statement for the
sale of its common stock, which has not yet been declared effective by the
Securities and Exchange Commission. The terms of the offering have not yet been
determined. The proceeds of the offering, if any, will be used for general
corporate purposes, including working capital and to continue the litigation
against the State of Florida. The costs incurred in connection with the offering
totaling $90,391 at December 31, 2001 are included in other assets.

COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 2001

5. Common Stock (Cont'd)
---------------------

The following represents shares issued upon sales of common stock:

Number Capital Capital in Excess
Year of Shares Stock of Par Value
---- --------- ------ ------------
1953 300,000 $ 30,000 $ 654,000
1954 53,000 5,300 114,265
1955 67,000 6,700 137,937
1956 77,100 7,710 139,548
1957 95,400 9,540 152,492
1958 180,884 18,088 207,135
1959 123,011 12,301 160,751
1960 134,300 13,430 131,431
1961 127,500 12,750 94,077
1962 9,900 990 8,036
1963 168,200 23,548 12,041
1964 331,800 46,452 45,044
1965 435,200 60,928 442,391
1966 187,000 26,180 194,187
1967 193,954 27,153 249,608
1968 67,500 9,450 127,468
1969 8,200 1,148 13,532
1970 274,600 32,952 117,154
1971 299,000 35,880 99,202
1972 462,600 55,512 126,185
1973 619,800 74,376 251,202
1974 398,300 47,796 60,007
1975 - - (52,618)
1976 - - (8,200)
1977 850,000 102,000 1,682,706
1978 90,797 10,896 158,343
1979 1,065,943 127,914 4,124,063
1980 179,831 21,580 826,763
1981 30,600 3,672 159,360
1983 5,318,862 638,263 1,814,642
1985 - (36,220)
-
1986 6,228,143 747,378 2,178,471
1987 4,152,095 498,251 2,407,522
1990 4,298,966 515,876 26,319
1996 6,672,726 800,727 5,555,599
2000 3,411,971 409,436 2,729,329
---------- ---------- -----------
36,914,183 $4,434,177 $25,103,772
---------- ---------- -----------

The following represents shares issued upon exercise of stock options:

Number Capital Capital in Excess
Year of Shares Stock of Par Value
---- ---------- ------ ------------
1955 73,000 $ 7,300 $175,200
1978 7,000 840 6,160
1979 213,570 25,628 265,619
1980 76,830 9,219 125,233
1981 139,600 16,752 227,548
1996 10,000 1,200 12,300
1997 10,000 1,200 10,050
--------- ------- --------
530,000 $62,139 $822,110
======= ======= ========

COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 2001

5. Common Stock (Cont'd)
---------------------

Coastal Caribbean has reserved 7,800,000 shares of its common stock
which may be issued in exchange for Coastal Petroleum shares, as described in
Note 2.

6. Stock Option Plan
-----------------

The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB No. 25) and related
Interpretations in accounting for its stock options because the alternative fair
value accounting provided under FASB Statement No. 123, "Accounting for Stock
Based Compensation," requires use of option valuation models that were not
developed for use in valuing stock options. Under APB No. 25, because the
exercise price of the Company's stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.

During 1995, the Company adopted a Stock Option Plan covering 1,000,000
shares of the Company's common stock. On March 24, 2000, ten year options to
purchase 700,000 shares of the Company's common stock were granted. A charge to
legal expense in the amount of $75,000 for the issuance of 100,000 options to
legal counsel was recorded. The charge was calculated using a Black-Scholes
option-pricing model with the same assumptions as discussed below. Options are
normally immediately vested and exercisable. The following table summarizes
stock option activity:

Options outstanding Number of Shares Exercise Price ($)
------------------- ---------------- ------------------

Outstanding and exercisable at December 31, 1998 587,000 1.13-2.625
Expired (60,000) 1.13
-------=
Outstanding and exercisable at December 31, 1999 527,000 1.13-2.625
Expired (302,000) . 1.13
Granted 700,000 .91
-------
Outstanding and exercisable at December 31, 2000 and 2001 925,000 .91 -2.625
=======
(1.33 weighted average)
Available for grant at December 31, 2001 55,000
---------------------------------------- ======

Year Granted Number of Shares Expiration Date Exercise Prices ($)
------------ ---------------- --------------- -------------------
Granted 1998 225,000 May 19, 2003 2.625
Granted 2000 700,000 Mar. 22, 2010 .91
-------
Total 925,000
=======

Pro forma information regarding net income and earnings per share is
required by FASB Statement No. 123, and has been determined as if the Company
had accounted for its stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option-pricing model.

COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 2001

6. Stock Option Plan (Cont'd)
--------------------------

Option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. The assumptions used
in the valuation model for 2000 were: risk free interest rate - 6.66%, expected
life - 10 years, expected volatility - .741 and expected dividend - 0.

Because the Company's stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.

For the purpose of pro forma disclosures, the estimated fair value of
the stock options is expensed in the year of grant since the options are
immediately exercisable. The Company's pro forma information follows:

Amount Per Share
Net loss as reported - December 31, 2000 $(1,385,552) $(.03)
Stock option expense (450,000) (.01)
--------- -----
Pro forma net loss - December 31, 2000 $(1,835,552) $(.04)
============ ======

7. Income taxes
------------

Bermuda currently imposes no taxes on corporate income or capital gains
outside of Bermuda. The Company's subsidiary, Coastal Petroleum, has U.S. net
operating loss carry forwards for federal and state income tax purposes, which
may be used to reduce its taxable income, if any, during future years which
aggregated approximately $13,218,000 at December 31, 2001 ($12,133,000 at
December 31, 2000) and expire in varying amounts from 2002 through 2021 as
follows: $2,931,000 in 2002, $824,000 in 2003, $647,000 in 2004, $550,000 in
2005, $418,000 in 2006, $549,000 in 2007, $480,000 in 2009, $571,000 in 2010,
$955,000 in 2011, $1,281,000 in 2012, $757,000 in 2018, $622,000 in 2019,
$749,000 in 2020 and $1,884,000 in 2021. For financial reporting purposes, a
valuation allowance has been recognized to offset the deferred tax assets
relating to those carry forwards. Significant components of the Company's
deferred tax assets were as follows:

2001 2000
---- ----
(Restated)

Net operating losses $4,974,000 $4,720,000
Deferred intercompany interest deduction 2,167,000 1,453,000
Write off of unproved properties 1,831,000 250,000
--------- -----------
Total deferred tax assets 8,972,000 6,423,000
Valuation allowance (8,972,000) (6,423,000)
----------- -----------
Net deferred tax assets $ - $ -
=== ===

COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 2001

8. Related parties
---------------

G&O'D INC provides accounting and administrative services, office
facilities and support staff to the Company. G&O'D INC is owned by Mr. James R.
Joyce, Treasurer and Assistant Secretary. During 2001, 2000 and 1999, G&O'D
billed fees of $135,573, $155,440 and $144,495 respectively. The Company was
billed $105,000 in 2001, $195,000 in 2000 and $65,000 in 1999 by the law firm of
Murtha Cullina LLP. Mr. Timothy L. Largay, a partner of the firm of Murtha
Cullina LLP, is a director and Vice President of the Company. Notes receivable
at December 31, 2001, represent a six month loan to an officer of the Company,
payable on May 10, 2002 with interest at 4% per annum

9. Selected quarterly financial data (unaudited)
---------------------------------------------

The following is a summary (in thousands) except for per share amounts
of the quarterly results of operations for the years ended December 31, 2001 and
2000:

2001 QTR 1 QTR 2 QTR 3 QTR 4
---- ----- ----- ----- -----

($) ($) ($) ($)
--- --- --- ---

Total revenues 37 23 13 5
Expenses (729) (623) (499) (4,813) (*)
----- ----- ----- -----------
Net loss (692) (600) (486) (4,808)
===== ===== ===== =======
Per share (basic & diluted) (.01)
===== ===== ======
(.02) (.01) (.11)
===== ===== =====
Average number of shares outstanding 43,468 43,468 43,468 43,468
======= ====== ====== ======

2000 QTR 1 QTR 2 QTR 3 QTR 4
---- ----- ----- ----- -----
($) ($) ($) ($)
--- --- --- ---
Total revenues 10 10 4 39
Expenses (386) (326) (317) (420)
----- ----- ----- -----
Net loss (376) (316) (313) (381)
===== ===== ===== =====
Per share (basic & diluted)
(.01) (.01) (-) (.01)
===== ===== === =====
Average number of shares outstanding 40,056 40,056 40,056 40,844
====== ====== ====== ======

(*) During the year 2001, the Company concluded that its property interests
were impaired by the actions taken by the State of Florida and
therefore, recorded an impairment charge in the amount of $4,202 to
reflect the write off of these costs

Prospective investors may rely only on the information contained in this
prospectus. Coastal Caribbean Oils & Minerals, Ltd., has not authorized anyone
to provide any other information. This prospectus is not an offer to sell to -
nor is it seeking an offer to buy these securities from - any person in any
jurisdiction where the offer and sale is not permitted. The information here is
accurate only as of the date of this prospectus, regardless of the time of the
delivery of this prospectus or any sale of these securities.

No action is being taken in any jurisdiction outside the United States to permit
a pubic offering of the common stock or possession or distribution of this
prospectus in any such jurisdiction. Persons who come into possession of this
prospectus in jurisdictions outside the United States are required to inform
themselves about and to observe the restrictions of that jurisdiction related to
this offering and the distribution of this prospectus.

COASTAL CARIBBEAN OILS & MINERALS, LTD.

______________SHARES

Common Stock

------------------
PROSPECTUS
------------------

______________, 2002

II-1
PART II.

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following is an estimate of our expenses in connection
with the issuance and distribution of the securities being registered, subject
to future contingencies:

Registration Fees $ 1,558
Stock Exchange Listing Fee 5,000
Printing and Engraving Expenses 35,000
Transfer Agent's and Registrar's Fees 45,000
Blue Sky Qualification Fees and Expenses 2,000
Legal fees and Expenses 150,000
Accounting Fees and Expenses 100,000
Miscellaneous 11,442
-------
Total $350,000
=========

Item 14. Indemnification of Directors and Officers.

Paragraph 161 of Coastal Caribbean's Bye-Laws contains the
following provisions respecting indemnification:

161. (1) The Directors, Secretary and other officers and each
person who is or was or had agreed to become a Director or
officer of the Company, and each such person who is or was
serving or who had agreed to serve at the request of the Board
of Directors or an officer of the Company as an employee or
agent of the Company or as a Director, officer, employee or
agent of another company, corporation, partnership, joint
venture, trust or other enterprise and every Auditor for the
time being of the Company and the liquidator or trustees (if
any) for the time being acting in relation to any of the
affairs of the Company and everyone of them, and everyone of
their heirs, executors, administrators and estates, shall be
indemnified and secured harmless out of the assets and profits
of the Company from and against all actions, costs, charges,
losses, damages and expenses which they or any of them, their
or any of their heirs, executors, administrators or estates,
shall or may incur or sustain by or by reason of any act done,
concurred in or omitted in or about the execution of their
duty, or supposed duty, in their respective offices or trusts;
and none of them shall be answerable for the acts, receipts,
neglects or defaults of the other or others of them or for
joining in any receipts for the sake of conformity, or for any
bankers or other persons with whom any moneys or effects
belonging to the Company shall or may be lodged or deposited
for safe custody, or for insufficiency or deficiency of any
security upon which any moneys of or belonging to the Company
shall be placed out on or invested, or for any other loss,
misfortune or damage which may happen in the execution of
their respective offices or trusts, or in relation thereto;
PROVIDED THAT this indemnity shall not extend to any matter in
respect of any fraud or dishonesty which may attach to any of
said persons. Subject to the provisions of the Act and without
limiting the generality or the effect of the foregoing, the
Company may enter into one or more agreements with any person
which provide for indemnification greater or different than
that provided in this Bye-Law. Any repeal or modification of
this Bye-Law shall not adversely affect any right or
protection existing hereunder immediately prior to such repeal
or modification.

(2) Each Member and the Company agree to waive any
claim or right of action he or it might have, whether
individually or by or in the right of the Company, against any
Director on account of any action taken by such Director, or
the failure of such Director to take any action, in the
performance of his duties, or supposed duties, with or for the
Company; PROVIDED THAT such waiver shall not extend to any
matter in respect of any fraud or dishonesty which may attach
to such Director. Any repeal or modification of this Bye-Law
shall not adversely affect any right or protection of a
Director of the Company existing immediately prior to such
repeal or modification.

In 1987, we purchased $100,000 of directors' and officers' liability
insurance coverage from an unaffiliated Bermuda company at a cost of $100,000
plus an annual $7,500 service fee during the period of the policy. During June
1997, the amount of the policy was increased from $100,000 to $200,000. We are
credited with investment income from the policy premium during the term of the
policy and all or a portion of such premium will be refunded at the end of the
policy term to the extent that no claims are made. We had been unable to obtain
any other liability coverage for the Company's directors and officers.

In recent years, the Company has been able to purchase directors' and
officers' insurance coverage. The current amount of its D&O coverage is $12.2
million (including the above policy) at an annual cost of $216,000.

Paragraph 161 (1) of the Company's Bye-Laws contains an indemnification
provision in favor of the Company's Auditor. The Company has not indemnified the
firm of Ernst & Young LLP nor has such indemnification been sought by Ernst &
Young LLP under this provision of the Company's Bye-Laws. In addition, such
indemnifications are deemed to be unenforceable under U.S. securities laws. The
Company will not provide the indemnification to Ernst & Young LLP or any other
accounting firm in the future.

Item 15. Recent Sales of Unregistered Securities.

None.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits

Item

1. Underwriting agreement.

Not applicable.

2. Plan of acquisition, reorganization, arrangement, liquidation
or succession.

Not applicable.

3. (i) Articles of Incorporation.

Memorandum of Association as amended on June 30, 1982, May 14,
1985 and April 7, 1988, filed as Exhibit 3(a) to Report on
Form 10-K for the year ended December 31, 1998 (SEC File
Number 001-04668) are incorporated herein by reference.

(ii) Bye-Laws.

Bye-Laws of the Company are incorporated by reference to
Exhibit A of the Company's Schedule 14(a) Proxy Statement
filed on May 13, 1997 (SEC File Number 001-04668).

4. Instruments defining the rights of security holders, including
indentures.

None.

5. Opinion re legality.

Form of opinion of Conyers Dill & Pearman, filed herein.

8. Opinion re tax matters.

Not applicable.

9. Voting trust agreement

Not applicable.

10. Material contracts.

(a) Drilling Lease No. 224-A, as modified, between the
Trustees of the Internal Improvement Fund of the State of Florida and Coastal
Petroleum Company dated February 27, 1947 filed as Exhibit 10(a) to Report on
Form 10-K for the year ended December 31, 1998 (SEC File Number 001-04668) is
incorporated herein by reference.

(b) Drilling Lease No. 224-B, as modified, between the
Trustees of the Internal Improvement Fund of the State of Florida and Coastal
Petroleum Company dated February 27, 1947 filed as Exhibit 10(b) to Report on
Form 10-K for the year ended December 31, 1998 (SEC File Number 001-04668) is
incorporated herein by reference.

(c) Drilling Lease No. 248, as modified, between the Trustees
of the Internal Improvement Fund of the State of Florida and Coastal Petroleum
Company dated February 27, 1947 filed as Exhibit 10(c) to Report on Form 10-K
for the year ended December 31, 1998 (SEC File Number 001-04668) is incorporated
herein by reference.

(d) Memorandum of Settlement dated January 6, 1976 between
Coastal Petroleum Company and the State of Florida filed as Exhibit 10(d) to
Report on Form 10-K for the year ended December 31, 1998 (SEC File Number
001-04668) is incorporated herein by reference.

(e) Agreement between the Company and Coastal Petroleum dated
December 3, 1991 filed as Exhibit 10(e) to Report on Form 10-K for the year
ended December 31, 1998 (SEC File Number 001-04668) is incorporated herein by
reference.

(f) Agreement between Lykes Minerals Corp. and Coastal
Caribbean and Coastal Petroleum dated October 16, 1992 filed as Exhibit 10(f) to
Report on Form 10-K for the year ended December 31, 1998 (SEC File Number
001-04668) is incorporated herein by reference.

(g) Stock Option Plan adopted March 7, 1995 filed as Exhibit
4A to Form S-8 dated July 31, 1995 (SEC File Number 033-95216) is incorporated
herein by reference.

11. Statement re computation of per share earnings.

See Consolidated Financial Statements.

12. Statement re computation of ratios.

None.

15. Letter re unaudited interim financial statements.

None.

16. Letter re change in certifying accountant.

Not applicable.

21. Subsidiaries of the registrant.

The Company has one subsidiary, Coastal Petroleum Company, a
Florida corporation which is 59 1/4 % owned.

23. Consent of experts and counsel.

1. Ernst & Young LLP - filed herein.
2. Conyers Dill & Pearman - filed herein.
3. Murtha Cullina LLP- filed herein.
4. Angerer & Angerer - filed herein.
5. Gaylord Merlin Ludovici Diaz & Bain - filed herein

24. Power of attorney.

Powers of attorney of Graham B. Collis, Nicholas B. Dill,
Benjamin W. Heath, John D. Monroe, Timothy L. Largay and
Phillip W. Ware, previously filed.

25. Statement of eligibility of trustee.

Not applicable.

26. Invitations for competitive bids.

Not applicable.

99. Additional exhibits

Rights Offering Documents

99.1 Form of subscription card - filed herein 99.2
Instructions for Purchasing Stock - filed herein 99.3 Offering
cover letter to Shareholders - filed herein 99.4 President's
letter to Shareholders-Reason for Offering- filed herein