Safe Harbor for Forward-Looking Statements
We are an energy delivery company engaged in the distribution of natural gas, electricity and propane; the transmission of natural gas; the generation of electricity and steam, and in providing related services to our customers.
Due to the seasonality of our business, results for interim periods are not necessarily indicative of results for the entire fiscal year. Revenue and earnings are typically greater during the first and fourth quarters, when consumption of energy is normally highest due to colder temperatures.
Earnings per share information is presented on a diluted basis, unless otherwise noted.
2022 to 2021 Gross Margin (GAAP) Variance - Regulated Energy
2022 to 2021 Gross Margin (GAAP) Variance - Unregulated Energy
Results of Operations for the Three and Six Months Ended June 30, 2022
Environmental, Social and Governance Initiatives
ESG initiatives are at the core of our well-established culture, guiding our strategy and informing our ongoing business decisions. In February 2022, Chesapeake Utilities published its inaugural sustainability report. In the report, we outline our ESG commitments:
Some of our most recent ESG advancements include the following:
Basic Earnings Per Share of Common Stock $ 0.96 $ 0.79
Diluted Earnings Per Share of Common Stock $ 0.96 $ 0.78
Increased margins related to demand for Marlin Gas Services*
(Increased) Decreased Operating Expenses (Excluding Natural Gas, Propane, and Electric Costs): Operating expenses from recent acquisitions
*See the Major Projects and Initiatives table.
Basic Earnings Per Share of Common Stock $ 3.05 $ 2.76
Diluted Earnings Per Share of Common Stock $ 3.04 $ 2.75
Key variances between the six months ended June 30, 2022 and the six months ended June 30, 2021, included:
Increased margins related to demand for Marlin Gas Services*
(Increased) Decreased Operating Expenses (Excluding Natural Gas, Propane, and Electric Costs): Operating expenses from recent acquisitions
Change in shares outstanding due to 2021 and 2022 equity offerings
*See the Major Projects and Initiatives table.
(1) Includes adjusted gross margin generated from interim services. (2) Includes adjusted gross margin from natural gas distribution services. (3) Subject to approval from the Florida PSC.
Detailed Discussion of Major Projects and Initiatives
CNG/RNG/LNG Transportation and Infrastructure
Other major factors influencing adjusted gross margin
Items contributing to the quarter-over-quarter increase in adjusted gross margin are listed in the following table:
Contributions from regulated infrastructure programs 1,080 Natural gas growth (excluding service expansions)
Quarter-over-quarter increase in adjusted gross margin $ 4,157
The following narrative discussion provides further detail and analysis of the significant items in the foregoing table.
Natural Gas Transmission Service Expansions We generated increased adjusted gross margin of $1.3 million for the three months ended June 30, 2022 from natural gas transmission service expansions including, Peninsula Pipeline's Western Palm Beach County project, Eastern Shore's Del-Mar Energy Pathway project and the Guernsey pipeline expansion.
Adjusted gross margin increased by $0.2 million due to the acquisition of the Escambia Meter Station which was consummated in June 2021.
For the six months ended June 30, 2022, compared to the six months ended June 30, 2021:
Items contributing to the period-over-period increase in adjusted gross margin are listed in the following table:
Natural gas growth (excluding service expansions) 2,132 Contributions from regulated infrastructure programs 2,004 Changes in customer consumption
Period-over-period increase in adjusted gross margin $ 8,452
The following narrative discussion provides further detail and analysis of the significant items in the foregoing table.
Increased customer consumption contributed additional adjusted gross margin of $0.4 million for the six months ended June 30, 2022.
Adjusted gross margin increased by $0.4 million due to the acquisition of the Escambia Meter Station which was consummated in June 2021.
Items contributing to the period-over-period increase in operating expenses are listed in the following table:
Items contributing to the quarter-over-quarter increase in adjusted gross margin are listed in the following table:
The following narrative discussion provides further detail and analysis of the significant items in the foregoing table.
•Acquisition of Diversified Energy - Adjusted gross margin increased by $1.5 million due to the acquisition of Diversified Energy, which was acquired by Sharp in December 2021.
propane suppliers, as well as the availability and price of alternative energy sources, may fluctuate based on changes in demand, supply and other energy commodity prices.
Items contributing to the quarter-over-quarter increase in operating expenses are listed in the following table:
(in thousands) Operating expenses from the Diversified Energy acquisition $ 2,258 Increased depreciation, amortization and property tax costs 264 Increased vehicle expenses due to higher fuel costs
Items contributing to the period-over-period increase in adjusted gross margin are listed in the following table:
Decreased customer consumption - intra-quarter weather volatility
Decreased customer consumption due to conversion of customers to our natural gas system
The following narrative discussion provides further detail and analysis of the significant items in the foregoing table.
•Acquisition of Diversified Energy - Adjusted gross margin increased by $5.5 million due to the acquisition of Diversified Energy, which was acquired by Sharp in December 2021.
Items contributing to the period-over-period increase in operating expenses are listed in the following table:
(in thousands) Operating expenses from the Diversified Energy acquisition $ 4,708 Increased payroll, benefits and other employee-related expenses 607 Increased depreciation, amortization and property tax costs
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
We are committed to maintaining a sound capital structure and strong credit ratings. This commitment, along with adequate and timely rate relief for our regulated energy operations, is intended to ensure our ability to attract capital from outside sources at a reasonable cost, which will benefit our customers, creditors, employees and stockholders.
The following table presents our capitalization, excluding and including short-term borrowings, as of June 30, 2022 and December 31, 2021:
We have entered into Shelf Agreements with Prudential and MetLife, whom are under no obligation to purchase any unsecured debt. The following table summarizes our Shelf Agreements at June 30, 2022:
(1) The Prudential and MetLife Shelf Agreements expire in April 2023 and May 2023.
The following table provides a summary of our operating, investing and financing cash flows for the six months ended June 30, 2022 and 2021:
Cash and cash equivalents-beginning of period 4,976 3,499 Cash and cash equivalents-end of period
Cash Flows Provided By Operating Activities
Cash Flows Used in Investing Activities
Net cash used in investing activities totaled $64.2 million during the six months ended June 30, 2022, largely driven by $65.1 million for new capital expenditures.
Cash Flows Used in Financing Activities
Recent Authoritative Pronouncements on Financial Reporting and Accounting
Recent accounting developments, applicable to us, and their impact on our financial position, results of operations and cash flows are described in Note 1, Summary of Accounting Policies, to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
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