Good morning. My name is Andrew and I will be your conference operator today. At this time, I would like to welcome everyone to the Chesapeake Utilities’ second quarter 2016 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Beth Cooper, Senior Vice President and CFO, you may begin your conference.

Good morning, everyone. I’d like to welcome those again that are in the room today. We are live today again at Salisbury University, and special thanks to the Perdue School of Business for hosting us again for our second quarter earnings conference call, and special hello to all those that are joining us on the phone. We are here today to talk about our second quarter and year to date results ended June 30, 2016. Before we begin, as always, I have to talk about the disclaimer that we have, that our presentation today may include discussions about forward looking information and we would like to refer everyone to our annual report on Form 10-K for 2015 where we discuss the factors that could cause our actual results to differ from our forward looking statements. Turning to Slide 13 to begin. Our second quarter results were higher than last year by approximately $0.11 per share. We recorded earnings per share of $0.52 -- diluted earnings per share for the quarter. Both on a net income and on an EPS basis, our earnings and our net income were approximately 27% higher than the previous quarter of 2015. You will see that, that was driven by higher operating income both in our regulated energy segment and in our unregulated energy segment. Basically you will see approximately $2.6 million of higher operating income with about $1.6 million or 63% of the increase coming from our regulated energy segment and the remaining 37% coming from our unregulated energy segment. There were lot of things that happened during the quarter that contributed to that increase, including service expansion, new services, customer growth, pricing amendments, pricing changes in terms and a lot of things that overall contributed from our lot of our businesses for us to…

Thanks, Beth. Good morning everyone. I guess, turning over to the next slide, this is a conversation I guess we have quite frequently with our investors and I’d like to maybe go through it little shortly here. The first thing is the bottom of the slide, the triangle, our engagement strategy for broad strategic infrastructure for sustainable growth. What we’re really looking for here is that we’ve got highly engaged employees that are doing a lot of great things out in the field and ultimately it’s those employees that are making this up possible and we have strategies that will increase our employees, I am going to try to like here. How is that? Is that working? And we’re sorry about that. At any event, as those engaged employees that are doing a lot of the great work is making the stuff possible and with that, we also expect a great deal of the work focused on safety. When you have that as a foundation that provides you with the opportunity to understate operator existing systems in reliable safe manner. And then you start adding on to that engaging with the communities as actually thinking that we do and we position ourselves for growth. And once we've done that appropriately, then we are able to move up the chain, rub the triangle and get to developing new business lines and executing existing business unit growth. And that’s been where Beth’s just been talking about, all of these growth opportunities we have been doing and executing on, and we are looking both in our existing territories – we’re looking to garner our existing territories and we’re looking for new services and then finally, once you do that properly, you get the results that we’re seeing. One, safety awards, top workplace, and…

[Operator Instructions] Your first question comes from the line of Spencer Joyce with Hilliard Lyons.

Beth, maybe a question for you here first. I know we saw a little bit of margin impact from Eight Flags and Rayonier venture which was a nice little surprise for me. I was a little surprised it came on the regulated side. I know some of that is, or ultimately I believe some of that will be unregulated margin. And the question is what is the split between what the reg and non-reg gross margin will be from that whole consolidated project once it's at kind of a full run rate there?

Basically, Spencer, right now the $7.3 million that we have out there includes the sale of the steam to Rayonier and also includes some of the regulated margin that’s also occurring. So we need to provide – because there were incremental or as you mentioned early margins, we're going to go back and as we lay out, the third quarter will actually provide more specifics about the pieces. But the pieces that you had for the second quarter included – it was about 432,000 on the regulated side and then a very small piece to get you to the 551,000 unregulated.

So with Q3 and maybe Q4 we will see a little cleaner split there.

Yes.

Okay, perfect. Shifting over to the CapEx budget for this year, I know we usually lag the whole budgeted amount. But I was wondering if the FERC approval announced just this morning for the reliability expansion may push us a little closer to the full budgeted amount this year or, really in general just of that FERC approval has any shift on the outlook for the rest of 2016?

As I showed on that one slide, right now the forecast is just under $180 million. What we look at, Spencer, in terms of kind of looking at it month by month with the approvals that we have, I think what we're seeing right now is we at least should come in I think somewhere between 150 to 170 but because of that developmental capital of 30 million, that I also laid on that slide, but it should be fairly close, we’re 70 million to 72 million in for six months. And when we compare that to our expanding and looking at last year, it’s tracking pretty close. So I don't think we’re going to be way far off but you could be somewhere between 160 to 180.

And then finally on the long term capital side, I know we have an agreement now for the $70 million of long term debt. I may have missed it. What is the -- or is there specific timing on that when we should model that in?

We can take that long term debt. We basically have until the end of April of 2017, that will be at 3.25, and so right now we continue to monitor it, part of that will be based on spending result there. We have some regulatory proceedings and filings are underway. And so we look at an overall project strategy and what are projects coming into service, coupled with our regulatory considerations, but at the latest we can draw that down it will be April of 2017.

So it's just on – essentially an as needed or as desired basis on your end.

The 70 million is locked in. So we will draw 70 million of long term debt before or by April 28 of next year, and we have another 80 million that we have on a shelf with credential that goes out for three years from when we initially entered into that. And so we can basically take that 80 million, we can negotiate that with the point that we decide based upon the timing of our CapEx, we can pull that down at a later time. But 70 million is committed, we’re pulling it, the question is between now and April 28, when do we draw?

Your next question comes from the line of Greg Cox with Baker America Merrill Lynch.

My question piggybacks on Spencer's question relative to the FERC approval of the Eastern Shore Natural Gas $36 million reliability project. You talked a little bit about the capacity increase on Slide 21. Have you had an opportunity to quantify the margin benefit that you expect from the project? It might be a question for Steve but any color that you can provide there.

Yes, Greg, I'm trying to get to the slide real quick here. But on that -- I think it was Slide 11. There is a slide where we have a gross margin table and I have a line there, it's actually Slide 11 and on there we have shown that right now our assumption in the future martin table is that it will be approximately $4.5 million on an annualized basis and it could be approximately half of that, we're estimating for 2017, so $225,000 is right now what we've got in our margin projection.

Thanks, Beth.

Thank you. A further comment, part of that we got the rate case filing that we're undertaking with Eastern Shore, we’re required to come back in. And so with that reliability project, it’s included within the rolled in treatment, and this is our best estimate right now but it could change as we move through that process. Steve, would you like to –

Beth, that’s exactly right. You’re exactly right, Beth. There is no new capacity associated with project, reliability project and we roll into the rate case and the FERC did authorize rolled-in treatments, so it will be recovered through the rate base. So we will be filing somewhere in the December or January timeframe. End of Q&A

[Operator Instructions] There are no further questions at this time. I will now turn the call back over to Mike McMasters.

Thank you. Thanks everyone for joining us. We appreciate your interest in the company. I can tell you everybody's dedicated to doing the things necessary to continue to drive our growth. We realize we’re responsible for generating capital that are attractive and we're committed to doing that. So thank you very much.

This concludes today's conference call. You may now disconnect.