Chesapeake reports higher earnings for 2nd quarter, 1st half of 2020

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Dover-based Chesapeake Utilities Corp. reported higher earnings for the first quarter and first half of 2020.

The company’s net income for the quarter ended June 30, was $11 million compared to $8.3 million for the same quarter of 2019.

Net income for the six months ended June 30 was $39.9 million compared to $37 million, o for the same period in 2019, representing an increase of 7.6 percent.

Revenue for the second quarter was $97 million, compared to $94.5 during the same period in 2019. First-half revenue was $249.7 million, down slightly from $255 million in 2019.

Earnings for the second quarter reflect increased gross margin from higher customer consumption driven primarily by colder weather, pipeline expansion projects, increased margin from Marlin Gas Services, higher retail propane margins per gallon, internal growth in the natural gas distribution operations, and contribution from the Boulden, Inc. acquisition.

These increases were offset by the net unfavorable impact of Covid-19 after including the Federal income tax benefit associated with the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

Weather during the first six months of 2020 was 8 and 7 percent warmer than the first six months of 2019 on the Delmarva Peninsula and in Ohio, respectively, which was a significant driver of lower consumption and reduced net income by $1.4 million, or $0.09 per share.

The weather impact was more than offset by gains from two property sales totaling $2.3 million on an after-tax basis.

The property sales are related to operations that have been consolidated into the company’s Energy Lane campus in Dover and the completion of the conversion of the piped propane system in Ocean City, MD to natural gas service.

For the three and six months ended June 30, 2020, the estimated impacts that COVID-19 had on the Company’s earnings was $0.9 million and $1.1 million, respectively, primarily driven by reduced consumption of energy largely in the commercial and industrial sectors, and incremental expenses associated with COVID-19, including protective personal equipment, premium pay for field personnel and higher bad debt expense.

The negative impact was partially offset by reduced federal income tax expense recognized in connection with implementation of the CARES Act and lower short-term borrowing costs resulting from a decrease in interest rates.

“The ability of our employees to execute during these challenging times is demonstrated by our strong performance and significant business achievements during the quarter. Generating increased performance quarter-over-quarter, as well as on a year-to-date basis, was a significant accomplishment in the midst of the COVID-19 pandemic and despite the absence of regulatory relief associated with Hurricane Michael. We have remained focused on the health of our employees and customers as we safely and reliably deliver our essential energy services during this global pandemic,” said Jeffry M. Householder, CEO.

Householder continued, “In addition to the safe delivery of these services, we have continued to execute on our growth strategy, including our pipeline and distribution system expansion projects as well as our business development activities. We recently announced two new projects that will support local communities in resolving long-term problems of poultry waste disposal and the impact on local waterways. These projects will transform poultry waste into renewable natural gas which will address the impacts of climate change and positively influence the local ecosystem. Despite the unique operating circumstances created by Covid-19, all business units remain focused on growth while also managing our expenses to help offset the COVID-19 impacts.”

Chesapeake provides natural gas and propane service in Delaware, Maryland and Florida. The company also has a small electric utility in Florida. It operates natural gas pipelines, a gas well gathering service in Ohio, and a truck transporter of liquified natural gas.

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