Good morning. My name is Chino and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Chesapeake Utilities Second Quarter 2019 Earnings Conference 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.I would now like to turn the call over to Ms. Beth Cooper. You may begin your conference.

Thank you Chino. Good morning, everyone. I'd like to welcome everyone to the Chesapeake Utilities second quarter 2019 earnings conference call. Joining me on the phone today are Jeff Householder, President and CEO and Jim Moriarty, Executive Vice President, General Counsel and Chief Risk and Compliance Officer. We have other members of the management team in the room with us.Today's call is being held at our Energy Lane Complex in Dover, Delaware. Our presentation will focus on our quarterly and year-to-date results as well as opportunities looking forward.Turning to slide 2. I know most of you are familiar with this slide, but it includes our normal disclosures related to forward-looking statements concerning the company's future performance. Again we refer you to our 2018 annual report for a list of factors that could cause our results to differ from that forward-looking information we've included in today's presentation.Today's discussion will also include certain non-GAAP measures such as gross margin and adjusted EPS.I will now turn the call over to Jeff.

Good morning and thanks for joining us. Good to speak with you today to deliver the company's second quarter results. I'm happy to report that Chesapeake Utilities has continued its long history, generating strong financial and operational results in the second quarter.Earnings per share in the quarter was $0.50, representing growth of 8.7% compared to last year in terms of adjusted earnings per share. And as always we continue to be very thankful for dedicated employee group that continue to identify and execute a combination of strategic growth and regulatory initiatives. We'll talk about several of those today.Our 2019 second quarter results reflect the positive impact from natural gas expansions in both Delmarva and Florida. We also saw lower operating expenses of about $0.14 a share that offset about a $0.09 reduction in earnings per share in quarter two from significantly warmer weather we experienced in Delmarva and Ohio this spring.You can see an income related chart on page 3. Those weather differences compared to normal and to last year remain fairly significant.Turning over to slide 4. Just the highlights from the first half of 2019, we have a long history as you all know in this company of generating shareholder return that are above at least 15%. We've continued that in the first half of 2019 with a 17.7% growth over 2018 adjusted EPS. And we've also increased the dividend by 9.5% in May of this year, which represents a five-year dividend growth of 8.4%.The growth across the businesses really is a reflection of the margin that we've driven through the projects that we've been able to execute on, new pipeline projects in service of about $8.1 million; natural gas distribution growth including our pipeline replacement projects in Florida and a variety of conversions about $3.4 million. And happy…

Yes. Thanks, Jeff. As mentioned earlier, we recorded GAAP earnings per share of $0.50 for the second quarter. The key drivers of our gross margin growth are identified on slide 7 and as you'll see added about $0.22 in earnings per share. Margin increases and natural gas transmission service expansion projects coupled with the associated natural gas distribution expansions in Delmarva and Florida added $3.7 million in pretax income or about $0.16 per share as shown on the slide.Natural gas distribution customer growth and Sandpiper conversions added $1.1 million in gross margin or $0.05 per share. The Unregulated Energy segment gross margin was positively impacted by $1.1 million from Marlin Gas Services and the old propane assets that we acquired late in 2018.Lower operating expenses related to outside services, facility costs and payroll-related expenses did offset the warmer weather experienced during the quarter. The higher level of depreciation, amortization and taxes are reflective of our investment in continuing to expand our footprint in our service territory. Interest expense related to growth and fully funding Hurricane Michael restoration costs increased $1.8 million. I'm going to talk about that further on the next slide.Before moving to the next slide though, I did want to comment about two key factors that negatively impacted the quarter even though our results were still very strong. First to elaborate on a point that Jeff mentioned earlier, the weather in the second quarter was significantly warmer compared to both the second quarter of 2018 and the 10-year average for the quarter. As a result, our earnings potential was 15% lower or $0.09 per share.Secondly, PESCO year-over-year reported results those negatively impacted EPS by $0.09 per share. We are working with the PESCO team to implement strategies that restore profitability as quickly as possible.Turning to slide eight, we…

Thank you, Beth. On slide 13, we provide a snapshot of major projects and initiatives. We'll use the table on slide 13 to highlight the growth projects that are either underway or completed as well as their margin contribution. For 2019, we expect margin growth of approximately $21 million, which includes $15 million achieved in the first half of the year.For 2020, we are currently anticipating $9 million in incremental gross margin as projects are completed or partially put into service next year. And obviously, we continue to seek out new projects that would add to that margin growth trajectory in 2020 and beyond. As you can see, the table does not include new projects under development. Once those projects have been approved, we include them in our forecast of margin for 2019, 2020 or beyond, depending on the actual in-service dates.It's important to note that we received approval on Wednesday for another natural gas pipeline expansion in Florida, what we call the Auburndale expansion project which will go into service this month and add incremental margin of approximately $300,000 in 2019 and annual margin of approximately $700,000. We'll provide more details of that project in our next quarterly filing. It was a relatively complicated project to put together and we are very happy to report that we're able to acquire a gate-station interconnect from Callahan actually on the Gulfstream pipeline and some pipe that's already interconnected into our distribution system which we will operate through Peninsula Pipeline, providing us another interconnect into the Central Florida gas system. It was a project that we took quite a bit of time to develop. I'm very happy to see it actually came to fruition.Turning to slide 14. Again, we are indicating here we're providing a list of recently completed and projects that…

Well, thank you Jeff and good morning, everyone. It is a pleasure to be back with you again today to talk about ESG which has been and continues to be fully and firmly ingrained in our DNA. For Chesapeake Utilities, our approach to ESG reflects our clear strategic focus our dedicated and engaged employees and our innovative and creative approaches that are laser-focused on meeting the needs of our customers.Slides 19 and 20 highlight just a few of our most recent ESG accomplishments and our focus areas of corporate governance, the foundation of our processes, and our decision-making; our employee-centric company and culture, which are the core of who we are; and our strong and enduring connections with our customers and the communities we serve. We have a long-standing history of ESG practices here at Chesapeake Utilities, and our internal working group had been reviewing industry practices and those of our peers and communicating with stakeholders to help inform our path forward to ensure we provide the most relevant information on ESG.Every day our employees rely on their entrepreneurial spirit to identify energy-efficient solutions, generate savings for our customers and reduce carbon emissions in our territories. In each of these actions, we all have an unwavering commitment to safety. In June, two of our subsidiaries FPU and Aspire Energy earned National Safety Achievement awards from the AGA based on criteria that included professional and personal commitment and dedication to improving the operations and engineering sectors of the national -- of the natural gas industry through safety, accident prevention and research.Our employees not only participate in community events, they also hold leadership roles in these important organizations. One example of these employees is mentioned on this slide, but there are others, many others here at our company. Finally, our Board embraces these same guiding principles, and we are gratified to recognize their many efforts that promote our ESG practices. We are proud of their extraordinary accomplishments including those of two of our directors, Dianna Morgan and Cal Morgan, which are highlighted here on slide 19.Thank you for your time and I'll turn the floor back to Jeff for closing remarks.

Thanks Jim. Just turning to slide 21, summarizing our investment proposition and our commitment to continuing to deliver superior performance. We believe we've laid a very strong foundation over the last really several decades, and certainly in the last several years that's going to provide an opportunity for us to deliver significant returns to our shareholders and provide energy efficient solutions for our customers and conduct business as Jim indicated in the right way with environmental responsibility.$1.7 billion now in assets in this company and our average return on equity for the past five years through the end of 2018 was 11.9%, and we have a strong balance sheet. We have a high retention rate for reinvestment and we are in fact reinvesting those dollars into projects that are generating significant margins and significant returns.We talked already about the total return in the company. I think it's fairly impressive. We have a group of very energized and dedicated employees that are driving this business forward and continuing to be quite enthusiastic in moving us down a path, and I think we're positioned well for continued growth. $178 million in capital spending forecast for this year something in the range of $750 million to $1 billion as Beth has indicated in several occasions targeted spending over the five-year period 2018 through 2022. And we are on track for annualized EPS growth in that 7.75% to 9.95% range.I think it's important to reemphasize that our corporate culture is based on a strong foundation of strategic focus, engaged employees, seeking innovative and safe ways to improve our business to serve our customers in a sustainable and environmentally friendly way, and certainly while keeping our eye on enhancing value to shareholders.We appreciate your interest in Chesapeake and your time this morning. Beth, Jim and I will be happy to address any questions that you may have.

[Operator Instructions] Your first question comes from the line of Tate Sullivan from Maxim Group.

Hi. Thank you. Good morning.

Good morning.

Good morning. A couple of quick questions and maybe I'll ask a follow-up too. And on the CapEx table that you normally put the other unregulated energy spending of $11 million is that fair to link that mostly to Marlin spending?

It's -- about 90% of that is associated with Marlin, yes, and the initiatives that we're looking at. There's a small piece in there for some projects that Aspire is also working on, but 90% of it Tate, is related to Marlin.

Okay. And is that -- I see on the slide is that -- I mean is that trailer car -- adding additional trailers to the fleet or is it other infrastructure-related costs for Marlin as well please?

It is primarily adding to the fleet. And as Jeff talked about we're looking at ways that we can serve some of those other markets in the facilities and equipment that will be able to help us access that.And Kevin Webber is on the line with us as well and joining us. Kevin is there anything you would like to add about that?

I think you're exactly right. It is the tankers and it is more compression and more unload reg stations, but it is all equipment to help pursue those new activities.

Okay. As a follow-up to that can you give us a specific example of a job Marlin has recently worked on?

Well, there are an awful lot of jobs that Marlin has recently worked on. We have -- one of the most recent ones is a hold for 15000 customers in South Florida where aligned was hit by a contractor. And it was at risk of all of those customers going out having to be shut off and turned back on. And so we were able to get into that area, hook tankers up, and maintain the system so that they did not lose those customers.

Great. Thank you. And Jeff on the Callahan Pipeline, real quickly, how long is a project like that under development? When did you start looking at it and the approval process and teaming up with a partner on that project?

Well, the actual development time probably dates back a decade. We've been looking at opportunities to build a pipe off of the Southern Natural transmission pipe that comes down through Georgia out of Savannah literally for 10 years or so.The original pipeline that moved gas up from Duval County through the Peoples Gas System and into Nassau County is obviously still active. This gives us the ability to actually reverse the flow of gas come off of the Southern Natural pipe with a significantly greater volume and pressure than we're able to get through FPT and into the Peoples Duval County system.So, it -- the real development with Emera has probably gone on for the last two years before we put a shovel in the ground but we've been looking at this project for literally a decade.

Okay. Thank you. Thank you for that. I'll get back in the line.

Thanks Tate.

[Operator Instructions] We do have a follow-up question from Tate Sullivan. Your line is now open.

Thanks. Sorry. I mean real quick I saw in the customer count electric customers dropped slightly in Florida and I think that was the case the previous quarter. What are the dynamics there?

It's the hurricane.

Okay.

It's customers that really didn't come back on because there are no houses there anymore in our northwest division and that really is the largest indicator or the largest issue there.

Okay, okay. And then the approval process regulatory for Callahan is it much faster in terms of building intrastate natural gas pipeline in Florida and Delaware for instance or is it about -- is it a similar regulatory backdrop?

It is different. The so-called intrastate pipes that we build in Delaware are coming off of the Eastern Shore FERC-regulated pipeline. And the Peninsula Pipeline and Florida intrastate transition pipe is regulated by the commission in Florida as opposed to FERC. So there is a significant layer of regulatory -- how can I delicately put this? Oversight there or time requirements to go through the FERC process that you don't see in Florida for intrastate pipe.

Okay. I asked because it just seems fast in terms of you getting the regulatory approval and then finishing the Callahan project. So -- and Beth real quick on accounting for that, because it's a 50-50 partnership there's no -- so it's -- the net margin is the net margin there's no like slight self for minority interest or anything like that?

That's correct, that's correct. There's -- this is not -- we both jointly own the project. It is not that it is a joint venture. It is -- we both jointly own it. So it is accounted for not unlike -- Tate we have another project in the past that we had done and we account for our investment and our margin shows up as ours in our financial statement.

Okay. Thank you. And then last for me is, can you give an update on -- sorry if I missed it on the Community Gas System propane strategy. Are you still seeing higher growth in that strategy than the rest of the propane business? If you can bifurcate that please?

So I mean, we are continuing to see growth in our Community Gas Systems both in our legacy service areas as well as we are having opportunities to evaluate projects even outside of our core service territory, because of the relationships that we've built. So when you look out our propane business today, there's really -- it's a multipronged growth strategy that's happening within that business as well. You have the CGS, which is continuing to grow. You have the start-ups that were initiated several years, where you're still having organic growth that's occurring.You have us moving to new locations. We're opening -- we will be opening up a start-up in the Baltimore area. And that's being driven by our AutoGas business, which is also growing both here on the peninsula and beyond into Pennsylvania into Florida and also on that western shore of Maryland. So there's a lot of opportunities for growth here and even beyond Tate in that business.

I think it's worth mentioning too that the strategy that was put in place relative to CGS being the kind of the first mover into an area where you couldn't get natural gas, it is working quite well. I mean, we're seeing now significant opportunities down toward the beach in Delaware to convert a number of our existing CGS propane systems over to natural gas as part of the expansions that we've had in those areas.And so that's exactly what we hope we would see a dozen years ago or so when we started down this path. And obviously, that then moves us down the path to find more CGS and do the same thing over the next several years, which is exactly what our propane business is doing. So that's -- it's nice when the planning comes together and that strategy is working out pretty much perfectly at this point.

Okay. That’s all for me. Thank you. Thank you very much for all the tips. Have a good rest of the day.

Thank you, Tate.

And there are no further questions at this time. I would now like to turn back the call over to the CEO of Chesapeake Utilities Corporation, Mr. Jeff Householder. You may continue.

Thank you. All I want to do is tell you how much again I appreciate you joining us today. We had a nice quarter and we look forward to a good report in the third quarter. And if there are other questions, we appreciate your time and good day.

Thank you.

Thank you.

Thank you.

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