Chesapeake Utilities Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Chesapeake Utilities first quarter 2020 earnings conference call. At this time, all participants line are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star and then zero. I would now like to hand the conference over to your speaker today, Beth Cooper. Thank you. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate you joining us today to review our first quarter results. With me on the call today are Jeff Householder, President and Chief Executive Officer, and Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary, and Chief Risk and Compliance Officer. We also have other members of our management team joining us virtually. Today's presentation can be accessed on our website under the investor section and events and webcast subsection or via our IR app. After our prepared remarks, we will be happy to take your questions. To begin, the theme of our 2019 annual report is driven by energy, delivering energy. The annual report cover and the first page of this presentation highlight the behaviors and values our employees exhibit every day. We designed the cover long before anyone had ever heard about a coronavirus pandemic. The words convey two distinct but complementary messages. Commitment, agility, safety, leadership, team, collaboration, service, adaptability, and community speak volumes about Chesapeake's ability to meet any challenge head on and prevail. Strategy, growth, sustainability, solutions, strength, improvement, performance, and value are the attributes that have driven the company to double in size twice over the past decade. The values and operating philosophy represented by these words are the foundation of everything we do. The COVID-19 pandemic has changed the way we conduct business day to day, but it has not changed our strategy, our ability to safely deliver energy services to our customers, or our commitment to strategic growth. Moving to slide two, let me remind you that matters discussed in this conference call may include forward-looking statements that involve risks and uncertainties. Forward-looking statements and projections could differ materially from our actual results. The safe harbor for forward-looking statements section of the company's 2019 annual report on Form 10-K and our quarterly report on Form 10-Q for the first quarter provide further information on the factors that could cause such statements to differ from our actual results. In our first quarter form 10Q, we highlight the risks and uncertainties related to the COVID-19 pandemic that could cause actual future results to differ materially from those expressed in any forward-looking statements, including but not limited to the duration and scope of the COVID-19 pandemic, and impact on the demand for our services, our ability to obtain needed materials and supplies, actions taken in response to the pandemic, including mandatory business closures, and restrictions of on-site commercial interactions, the pace of recovery, and the impact on economic conditions. Now I would like to turn the call over to Jeff to provide some opening remarks on our first quarter performance, more details on our COVID-19 response, and some insights on our outlook going forward. Jeff?

Thank you, Beth, and good afternoon, and thank all of you for joining our call for the first quarter of 2020. I'd like to first touch upon our strong performance for the quarter. The milder winter weather decreased customer consumption, but we successfully overcame that shortfall, largely due to our continuing growth initiatives. Our first quarter of 2020 net income rose to $28.9 million, or $1.76 per share, as shown on slide three. Growth in our natural gas distribution business, both organically and from new pipeline expansions, strong contributions from Bolland Gas, acquired in December of 2019, and increased retail propane margins per gallon were the primary drivers. It's worth noting that results for the quarter do not reflect the benefit of electric rate relief for costs incurred from Hurricanes Michael and Dorian. We reached a settlement with the Florida Office of Public Counsel on the recovery costs and are collecting rates on an interim basis until we receive final approval from the Florida PSC. We're reserving the full interim rate margins until we receive that final approval, which is expected during the second half of this year. Property sales of two facilities that were no longer needed also contributed to quarter one results. Beth will provide a more detailed discussion of the first quarter results later in the call. Also, we continue to make significant capital investments to ensure future growth with a total of $41 million in spending recorded during the first quarter. We've continued to progress on our expansion projects and our timelines for placing our major projects into service. have not been impacted by the social distancing requirements imposed within our service territories. This morning, our Board of Directors expressed their continued confidence in the strong fundamentals and positive outlook for our business by declaring the new annualized dividend of $1.76 per share double what our dividend payment was 10 years ago. While the first quarter was strong, we certainly find ourselves operating today in extraordinary times. Our thoughts are with all of those that have lost someone to this virus, and we salute the heroic efforts of the many people that have been on the front lines battling this pandemic. It would have been hard to imagine a little over two months ago that today we would have 30 million people unemployed in this country, states trying to restart their economies without triggering a second wave of the virus, and models projecting COVID-19 lingering for many more months, if not years. It's a tough decision trying to weigh the economic hardship against potential health risks. We've been part of the continuing solution here at Chesapeake. Our energy delivery services are essential businesses that customers and communities depend on. We have not experienced the steep revenue decrease and resulting business and employee impacts faced by many companies. Our challenge is to implement and maintain a plan that enables us to keep our people safe and our energy delivery systems operational, while at the same time helping our communities to support those who've been less fortunate. We have a long history of responding to natural disasters. When you operate utility systems in Florida, planning and executing a recovery response is second nature. That certainly helped in this situation. The pandemic response is different in many ways from a hurricane, but the fundamental principles of staying calm, focusing on safety, working the plan, communicating expansively, and finding solutions to whatever comes up are much the same. Turning to slide four, we started actively tracking the spread of the coronavirus in early February. The team pulled our pandemic response plan, which was originally developed in 2007 for the H5N1 influenza pandemic, and we began updating the plan specifics based on what we were seeing in Asia and Europe. Shortly after our 2019 year-end earnings call, the first U.S. case of COVID-19 was confirmed in California. We immediately stood up our pandemic task force, canceled all large events, suspended all nonessential travel, began expanding our VPN capacity to support remote work, placed orders for additional PPE, and a hundred other things. We were also one of the first utilities in the country to stop non-pay disconnects and waive late fees. Our pandemic response plan includes two primary objectives. First and foremost, ensure the company takes rational, measured, and if necessary, escalating actions designed for the protection and safety of employees, customers, and the communities we serve. Second, the plan is designed to maintain our ability to provide uninterrupted delivery of the energy services in each of our businesses. I think we have executed quite well on those objectives. To date, we have had zero confirmed employee cases of COVID-19. From the initial activation of our plan, we have actively identified and tracked potential COVID-19 employee exposure, relied on temperature testing, and utilized the contact tracing process. We believe the steps we've taken to promote social distancing, enhance the use of PPE for field employees, and the increased level of facility cleaning have contributed to our success. In our operations units, we have followed CDC, OSHA, and industry best practices for PPE, again, social distancing, and pre-screening job sites prior to entering a building. Our transmission and distribution systems are operating with control rooms, compressor stations, and other critical functions fully staffed. We've been able to safely continue our pipeline construction projects, Our Marlin CNG and chart propane trucks continue to deliver fuel to customers. The Eight Flags CHP is generating electricity with a socially distanced and staggered shift control center. Our business development team continues to pursue opportunities, and our corporate support teams quickly adapted to home offices, virtual meetings, and network share points. It's not exactly business as usual, but we are running the business, and we're running it effectively. In some ways, our current situation is working better than our traditional office environment. Internal employee communications have significantly increased. I'm hosting a weekly all-hands employee call, providing both pandemic response and business updates. We'll follow those calls with an immediate employee survey and management responds quickly to suggestions and concerns. Not surprisingly, our safety focus, while always strong, has been enhanced to a new level that we're determined to continue. We have increased our cybersecurity efforts, recognizing that there are new threats and potential vulnerabilities as we change our work conditions. We're also finding out that some of the things we were doing before the pandemic really aren't that mission critical. We were already evaluating our operating processes, looking for greater standardization and simplicity. The shift to remote work and the need to ensure safe conditions in an evolving environment have significantly accelerated our process improvement effort across the company. In all of this, we've learned a great deal. We've learned that we can effectively run this company with hundreds of employees working and collaborating remotely. We're figuring out how to stay connected and productive. We have also reaffirmed a few things about the people that work for Chesapeake, that they are capable of moving quickly, thinking on their feet, and driving to execute a plan regardless of how tough the situation. I've always been impressed that Chesapeake Utilities is a company full of people that do things. They don't just talk about doing them. I think it's the very essence of who we are as a company. So what's next? Our strategy is simple. Keep people safe and do what has been working until we have much greater certainty about how this is going to play out. We will not put at risk our people or our central mission of delivering essential energy services. We will take a cautious, measured approach to changing our existing operating conditions. Several task force groups are working to finalize a phased return to the office plan. I would not expect that to occur to any significant extent before the end of the year. I don't see that timing having any negative impact on our ability to continue to effectively operate this business. Now let me ask Jim Moriarty to update you on the governmental and regulatory fronts, particularly as it relates to COVID-19.