Chesapeake Utilities Corporation

Greetings and welcome to the Chesapeake Utilities Corporation second quarter financial results. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question and answer session, and at that time, if you have a question, you can press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, you can press star zero. And as a reminder, this conference has been recorded Thursday, August 5th, 2021. Now I'd like to turn it over to Beth Cooper, Investment Vice President, Chief Financial Officer, and Assistant Secretary. Please go ahead.

Thank you, and good afternoon, everyone. It is great to be with all of you today. We appreciate you joining us to review our second quarter and year-to-date performance through June 30, 2021. Yesterday, we announced our financial results, which demonstrated how we continue growing and operating effectively, serving our customers, identifying and executing on new investment projects, and keeping our employees as safe as possible in this ever-changing environment. As shown on slide two, participating 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 Policy and Risk 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. After our prepared remarks, we will open the call up for questions. Moving to slide three, I'd like to 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 2020 annual report on Form 10-K and our first and second quarter Form 10-Qs provide further information on the factors that could cause such statements to differ from our actual results. Additionally, I'd like to mention that we've added some new disclosures in our quarterly reports to highlight some of our key environmental, social, and governance, or ESG, initiatives. While Jim typically talks about these initiatives during our earnings conference calls, as he will later on today, we wanted to provide more disclosure in our filed documents. We would welcome your feedback on our enhanced reporting. Now I'll turn the call over to Jeff to provide some opening remarks on the company's second quarter and year-to-date results and the key drivers of our performance. Jeff?

Thank you, Beth, and good afternoon, and thank you for joining our call today. Let's start as usual with an update on COVID-19 and our continuing efforts to manage through the ongoing pandemic. When we spoke during the first quarter earnings call, the trend was positive in terms of reduced COVID-19 infections and serious illness. The vaccines, along with continued preventative measures, were proving to be remarkably effective. The good news didn't last long as the U.S. relaxed many of its pandemic precautions and vaccine levels plateaued. We've seen an uptick in COVID-19 cases across the country, including in our core service territories. As has been widely reported in Florida, the case levels are now greater than at any time over the entire course of the pandemic and hospitals are full. However, Florida and all of the other states we serve remain, at this point, open for business. Notwithstanding the latest COVID surge, we are not to date experiencing any significant COVID-related reductions in usage or margin in any of our service areas. Our return to the office plan has long included the possibility that we would see another surge in COVID cases this fall. Over the past few months, we've been watching the Delta variants impacts in India and the UK. Even prior to the Delta variant spreading in the U.S., our remote work teams were not scheduled to return to the office until late fall after school resumed and after we had a better view of any additional surge. We've been operating effectively for well over a year with a remote administrative workforce, and there was really no need to risk returning to the office in the midst of another potential wave of cases. Of course, Chesapeake is an essential business providing essential energy services. Our operations field service teams remain fully deployed as they have been throughout the pandemic. We have continuously followed CDC and OSHA guidelines, establishing health and safety protocols, including wearing masks and social distancing. We continue to encourage but not require vaccination and are providing several incentives to assist employees as they make their choice. I'm very proud of our team. Our employees have embraced the challenges presented by this pandemic. We have continued to find ways to serve customers and keep our growth initiatives underway. The very growth projects that ultimately drive Chesapeake's financial performance. We had a very strong 2021 second quarter with continued profitable growth across many of our business units, augmented by successful regulatory outcomes. As shown on slide four, earnings per share from continuing operations was 78 cents, an increase of 14 cents or 21.9 percent compared to our second quarter of 2020 earnings per share of 64 cents. Gross margin increased more than $10 million over the second quarter of 2020. Our results reflect increased consumer consumption returning close to pre-pandemic conditions. We were also able to reduce COVID-19 pandemic expenses for the second quarter. Some of the key margin drivers for the quarter included pipeline expansion projects, the Hurricane Michael regulatory settlement, organic natural gas distribution, customer growth, contributions from recent acquisitions of Elton Gas and Western Natural Gas, and increased margin from Aspire Energy. Our unregulated segment was down slightly as we experienced the normal seasonal decline in propane volume. We also experienced reduced margins from emergency response deployments at Marlin gas services. That was expected as we continued to migrate Marlin toward longer-term service agreements supporting pipeline maintenance, system purge or blowdown capture, and R&G transport. Year-to-date 2021 earnings per share from continuing operations was $2.75, an increase of 34 cents, or 14.1%, compared to $2.41 for the first six months of 2020. We continue to be fortunate to provide energy delivery services to communities that are experiencing significant growth. These communities appreciate and value the energy we deliver. As one measure of growth, we connected an average of 15 new customers per business day in our Delmarva natural gas territory and over 2,500 new customers in Delaware, Maryland, and Florida combined over the past six months. We've invested more than a billion dollars over the past five years in support of regulated and non-regulated growth in the areas we serve. Our 2021 capital investment through the second quarter totaled just under $108 million, putting us on track to achieve our annual projected capital investment range of $175 million to $200 million. As I mentioned a moment ago, these growth investments are driving our financial performance. I would point out that our net income for the first six months of 2021 was $48.3 million, which is more than our annual net income total for the full year of 2016. That is remarkable growth over less than a five-year period. Over the next several years, we see continued growth opportunities on Delmarva, in Florida, and across the Mid-Atlantic and Southeast. Our natural gas customer additions have been trending at a rate that is well above the national average. We're seeing growth rates of 4.5% in Delmarva, 5.1% in Florida. Our propane business continues to expand through both organic additions and selected acquisitions. We see opportunities for small-scale transmission pipelines, growth in our Marlin CNG transport business, and a growing portfolio of renewable energy investments. I'll add more about our continued growth initiatives and capital investment projects across our business units in just a few minutes. But let me turn the call back over to Beth for more details on our quarterly performance. Beth?