Chesapeake Utilities Corporation Reports Third Quarter 2021 Results

FOR IMMEDIATE RELEASE

November 3, 2021

NYSE Symbol: CPK

CHESAPEAKE UTILITIES CORPORATION REPORTS

THIRD QUARTER 2021 RESULTS

• Earnings per share ("EPS")* was $0.71 for the third quarter of 2021, an increase of $0.15, or 26.8 percent, compared to $0.56 for the third quarter of 2020
• Year-to-dateearnings increased to $3.45 per share from $2.97, for the prior year
• Natural gas organic growth and pipeline expansions, regulatory initiatives and contributions from 2020 and 2021 acquisitions generated $2.7 million and $14.2 million in additional gross margin during the third quarter and year-to-date, respectively
• Continued return toward pre-pandemic conditions increased consumption compared to 2020
• Completed construction of the Company's first Renewable Natural Gas transportation project
• Continued focus on organic growth and expansion projects as well as our ESG initiatives, including renewable energy opportunities focused on enhancing sustainability within our local communities
• Executed first sustainability linked financing arrangement during the third quarter of 2021
• Total assets exceeded $2 billion at September 30, 2021

Dover, Delaware- Chesapeake Utilities Corporation (NYSE: CPK) ("Chesapeake Utilities" or the "Company") today announced its financial results for the third quarter of 2021. The Company's net income for the quarter ended September 30, 2021 was $12.5 million, or $0.71 per share, compared to $9.3 million, or $0.56 per share, for the same quarter of 2020. Net income for the nine months ended September 30, 2021 was $60.8 million, or $3.45 per share, compared to $49.1 million, or $2.97 per share, for the same period of 2020.

Higher earnings for the third quarter of 2021 reflected natural gas growth in the Company's transmission and distribution businesses, improved propane margins, contributions from the 2020 and 2021 acquisitions, as well as a return toward pre-pandemic consumption levels as states of emergencies have been gradually lifted in the Company's service territories.

On a year-to-date basis, earnings were impacted by the positive factors noted above, as well as a return toward more normal weather.

"Our team continued to deliver strong performance during the third quarter which, when added to their efforts for the first half of the year, positions us well for the final quarter of the year. Our double digit earnings

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for both the quarter and year-to-date was attributable to strong margin growth across the Company, generated from higher consumption as volumes resumed closer to pre-pandemic levels, new margin from pipeline expansion projects, organic natural gas distribution customer growth, contributions from Elkton Gas and Western Natural Gas, increased propane margins per gallon and margins from Aspire Energy and Marlin Gas Services. Not only is the third quarter typically the lowest contributing quarter of the year, but third quarter 2020 included a cumulative margin adjustment for the Hurricane Michael settlement. Even with this timing difference from 2020, our third quarter 2021 EPS was 26.8 percent higher than third quarter 2020 EPS," commented Jeff Householder, President and CEO. "We have also achieved two significant milestones because of our team's efforts, completing our first Renewable Natural Gas transportation project and securing our first sustainability linked financing. These projects are only a sample of the many sustainable energy delivery projects being pursued across the organization to drive increased shareholder value. Because of these opportunities, we believe that Chesapeake Utilities is uniquely positioned as we head into the final stretch of 2021 and beyond," Householder added.

In March 2020, the U.S. Centers for Disease Control and Prevention ("CDC") declared a national emergency due to the rapidly growing outbreak of COVID-19. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These restrictions significantly impacted economic conditions in the United States in 2020 which have continued throughout 2021. Chesapeake Utilities is considered an "essential business," which has allowed the Company to continue operational activities and construction projects while adhering to the safety procedures intended to limit the spread of the virus. At this time, restrictions continue to be lifted as vaccines have become widely available in the United States. For example, the state of emergency in Florida was terminated in May 2021 followed by Delaware and Maryland in July 2021, resulting in reduced restrictions. The expiration of the states of emergency in the Company's service territories has also concluded the ability to defer incremental pandemic related costs for consideration through the applicable regulatory process. Despite these positive state orders and in light of the continued emergence and growing prevalence of new variants of COVID-19, the Company continues to operate under its pandemic response plan, monitor developments affecting employees, customers, suppliers, stockholders and take all precautions warranted to operate safely and to comply with the CDC, and the Occupational Safety and Health Administration, in order to protect its employees, customers and the communities it serves.

Capital Expenditures Forecast and Earnings Guidance Update

In February 2021, the Company updated and extended its capital expenditures and EPS forecasts through 2025. The included initiating new five-year capital expenditures guidance from 2021 through 2025, of $750 million to $1 billion and consequently amending and extending EPS guidance to $6.05-$6.25 for 2025. The Company continues to review its projections and remains supportive of this guidance.

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Operating Results for the Quarters Ended September 30, 2021 and 2020

Consolidated Results

		Three Months Ended
		September 30,
(in thousands)		2021				2020				Change				Percent
										Change
Gross margin	$	79,971			$	79,508			$	463				0.6	%
Depreciation, amortization and property taxes		21,165				22,976				(1,811)	(7.9)%
Other operating expenses		38,693				39,126				(433)				(1.1)	%
Operating income	$	20,113	$	17,406		$	2,707	15.6 %

Operating income during the third quarter of 2021 was $20.1 million, an increase of $2.7 million, or 15.6 percent, compared to the same period in 2020. During the third quarter of 2020, the Company settled the Hurricane Michael limited proceeding which resulted in $1.9 million in operating income being recognized which related to the first and second quarters of 2020. Excluding the absence of this timing difference, operating income increased $4.6 million compared to the third quarter of 2020. Higher performance in the third quarter of 2021 was generated from continued pipeline expansion projects, contributions from the 2020 acquisitions of Elkton Gas Company ("Elkton Gas") and Western Natural Gas Company ("Western Natural Gas"), higher margins from consumption returning toward pre-pandemic levels, natural gas distribution growth, increased propane margins, and margin growth from increased investment in the Florida Gas Reliability Infrastructure Program ("GRIP"). The Company recorded higher depreciation, amortization and property taxes related to recent capital investments and operating expenses associated primarily with growth initiatives, including payroll, benefits and other employee-related expenses. These expense increases were largely offset by $3.0 million of lower pandemic related costs and the establishment of regulatory assets for COVID-19 expenses.

Regulated Energy Segment
		Three Months Ended
		September 30,
(in thousands)		2021				2020				Change				Percent
										Change
Gross margin	$	65,102			$	66,491			$	(1,389)				(2.1)	%
Depreciation, amortization and property taxes		17,215				19,617				(2,402)	(12.2)%
Other operating expenses		24,349				26,392				(2,043)				(7.7)	%
Operating income	$	23,538	$	20,482		$	3,056	14.9 %

Operating income for the Regulated Energy segment for the third quarter of 2021 was $23.5 million, an increase of $3.1 million, or 14.9 percent, over the same period in 2020. During the third quarter of 2020, the Company settled the Hurricane Michael limited proceeding which resulted in $1.9 million in operating income being recognized which related to the first and second quarters of 2020. Excluding this timing difference, operating income increased $5.0 million compared to the third quarter of 2020. Higher operating income reflects continued pipeline expansions by Eastern Shore and Peninsula Pipeline, increased consumption from a return toward pre-pandemic consumption levels, organic growth in the Company's natural gas distribution businesses, and operating results from the Elkton Gas and Escambia Meter Station

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acquisitions completed in 2020 and 2021, as well as lower expenses. Operating expenses decreased by $3.0 million compared to the prior year quarter due to a lower level of overall pandemic related costs compared to 2020 and the establishment of regulatory assets for COVID-19 expenses as authorized by the PSCs.

The key components of the decrease in gross margin are shown below:

		(in thousands)
		Margin impact from the Hurricane Michael regulatory proceeding settlement (includes the			$		(5,507)
		absence of first and second quarter 2020 impact recorded in the third quarter of 2020)
		Eastern Shore and Peninsula Pipeline service expansions															795
		Improved margin from electric operations																653
		Natural gas growth (excluding service expansions)																620
		Margin contribution from 2020 and 2021 acquisitions															483
		Florida GRIP																475
		Increased customer consumption - primarily due to a return toward pre-pandemic conditions					314
		Eastern Shore capital surcharge																304
		Other variances																474
		Quarter-over-quarter decrease in gross margin												$		(1,389)
	The major components of the decrease in other operating expenses are as follows:
		(in thousands)
		Regulatory deferral of COVID-19 expenses per PSCs orders									$		(2,437)
		Net reduction in expenses associated with the COVID-19 pandemic												(546)
		Payroll, benefits and other employee-related expenses due to growth												612
		Operating expenses from the Elkton Gas acquisition																204
		Other variances																124
		Quarter-over-quarter decrease in other operating expenses									$		(2,043)
	Unregulated Energy Segment
				Three Months Ended
				September 30,
(in thousands)		2021				2020					Change				Percent
											Change
	Gross margin	$	14,897			$	13,068				$		1,829				14.0	%
Depreciation, amortization and property taxes		3,921				3,326						595	17.9 %
	Other operating expenses		13,859				12,834						1,025				8.0	%
Operating income (loss)	$	(2,883)			$	(3,092)				$		209	6.8 %

Operating results for the Unregulated Energy segment for the third quarter of 2021 increased by $0.2 million, compared to the same period in 2020. The operating results for this segment typically exhibit seasonality with the first and fourth quarters producing higher results due to colder temperatures. The results for the third quarter are not indicative of the results for the entire year.

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Higher operating results during the third quarter were driven by increased propane margins, contributions from the Company's acquisition of Western Natural Gas and margin improvement from Aspire Energy of Ohio ("Aspire Energy") as well as increased consumption in the propane businesses as volumes continue returning toward pre-pandemic levels. Increased operating results were partially offset by higher operating expenses, depreciation, amortization and property taxes related to recent capital investments, and expenses associated with Western Natural Gas.

The major components contributing to the change in gross margin are shown below:
(in thousands)
Propane Operations
Increased retail propane margins and service fees	$	751
Western Natural Gas acquisition (completed in October 2020)			372
Increased wholesale propane margins			243
Increased customer consumption - primarily due to a return toward pre-pandemic conditions			222
Increased customer consumption - primarily weather related			122
Aspire Energy
Increased margin including improvements from natural gas liquid processing			320
Other variances			(201)
Quarter-over-quarter increase in gross margin	$	1,829
The major components of the increase in other operating expenses are as follows:
(in thousands)
Payroll, benefits and other employee-related expenses due to growth	$		427
Operating expenses from the Western Natural Gas acquisition			273
Net increase in operating expenses associated with a return toward pre-pandemic conditions			123
Other variances			202
Quarter-over-quarter increase in other operating expenses	$		1,025

Operating Results for the Nine Months Ended September 30, 2021 and 2020

Consolidated Results

(in thousands)

Gross margin

Depreciation, amortization and property taxes Other operating expenses

Operating income

	Nine Months Ended
	September 30,
	2021				2020				Change				Percent
										Change
$	281,241			$	253,418			$	27,823				11.0	%
	62,407				57,103				5,304	9.3 %
	124,546				118,797				5,749				4.8	%
$	94,288	$	77,518		$	16,770	21.6 %

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