Chesapeake Utilities(US:CPK)2021-05-04 20:54Financial Performance - Income from continuing operations for Q1 2021 was $34.5 million, or $1.96 per share, compared to $29.0 million, or $1.77 per share in Q1 2020, representing a 19.0% increase in earnings per share [161]. - Operating income for Q1 2021 increased by $9.5 million, or 22.5%, over the same period in 2020, driven by pipeline expansion projects and favorable regulatory initiatives [161]. - Total gross margin for Q1 2021 was $116.9 million, up from $99.8 million in Q1 2020, reflecting an increase of $17.1 million, or 17.1% [163]. - The company recorded regulatory assets in Q4 2020 related to incremental expenses incurred due to the COVID-19 pandemic [160]. - In the first quarter of 2021, the company reported a pre-tax income of $46,877,000 and a net income of $34,472,000, resulting in earnings per share of $1.96 [167]. - The gross margin increased by $16,996,000 in the first quarter of 2021 compared to $12,499,000 in the first quarter of 2020, reflecting a growth of approximately 36% [167]. Segment Performance - Regulated energy segment gross margin increased by $10.0 million to $78.2 million in Q1 2021, while unregulated energy segment gross margin rose by $7.0 million to $38.8 million [163]. - Operating income for the Regulated Energy segment increased by $5.0 million or 17.8% to $32.9 million in Q1 2021 compared to Q1 2020, driven by increased consumption and regulatory settlements [198]. - Revenue for the Unregulated Energy segment increased to $74.8 million in Q1 2021, up from $54.0 million in Q1 2020, representing a growth of 38.5% [209]. - Operating income for the Unregulated Energy segment was $19.1 million, an increase of $5.2 million or 37.8% compared to the same period in 2020 [209]. Growth Strategies - The company is focused on optimizing earnings growth through organic growth, territory expansions, and new products and services [153]. - The company’s growth strategy includes pursuing strategic propane acquisitions to expand its market presence [153]. - Marlin Gas Services is expanding its CNG transport business and entering LNG and RNG transport services, as well as methane capture [153]. - The company plans to continue expanding its natural gas distribution and transmission systems, with significant capital allocated for infrastructure improvements and strategic initiatives [222]. Weather Impact - The company experienced a return to more normal weather conditions in Q1 2021, which positively impacted energy consumption compared to the warmer weather in Q1 2020 [161]. - Increased customer consumption due to weather resulted in a gross margin increase of $1.6 million, with an 18% increase in HDDs on the Delmarva Peninsula and a 36% increase in Florida [203]. - Weather conditions accounted for a $6.4 million increase in gross margin in Q1 2021 compared to Q1 2020, primarily due to a 13.8% increase in HDDs [193]. - Customer consumption in Propane Operations increased by $3.8 million, attributed to 18% colder weather on the Delmarva Peninsula compared to Q1 2020 [211]. Capital Expenditures and Investments - Capital expenditures for Q1 2021 were $48.7 million, with a forecasted range for total capital expenditures in 2021 between $175 million and $200 million [221]. - The company expects the West Palm Beach County expansion project to generate an annual gross margin of $5,000,000 in 2021 and $5,200,000 in 2022 [171]. - The Del-Mar Energy Pathway project is anticipated to provide an additional 14,300 Dts/d of firm service and is expected to be fully operational by Q4 2021 [172]. - The acquisition of Western Natural Gas is expected to generate a gross margin of approximately $1,800,000 in 2021 [183]. Financial Position and Debt - Long-term debt as of March 31, 2021, was $508.5 million, accounting for 41% of total capitalization, which was $1.23 billion [226]. - The company issued 1.0 million shares of common stock in late 2020, raising approximately $83.0 million for general corporate purposes [227]. - The company has a funded indebtedness ratio of no greater than 65%, and as of March 31, 2021, it was in compliance with this covenant [234]. - The company has authorized up to $375 million in short-term debt, with $214.1 million available under the new Revolver as of March 31, 2021 [235]. Cash Flow and Liquidity - Net cash provided by operating activities increased to $80.4 million for the three months ended March 31, 2021, compared to $58.8 million for the same period in 2020, reflecting a $21.6 million increase [241]. - Net cash used in investing activities totaled $51.8 million in Q1 2021, up from $31.5 million in Q1 2020, primarily due to capital expenditures of $52 million compared to $35.2 million in the prior year [242]. - Net cash used in financing activities was $26.5 million in Q1 2021, an improvement from $30.3 million in Q1 2020, driven by the absence of long-term debt repayments [243]. Risk Management - The company actively seeks new producers to fulfill natural gas purchase requirements and mitigate commodity price risks [255]. - The Risk Management Committee reviews credit risks associated with counterparties to commodity derivative contracts prior to approval [259]. - The unregulated energy segment faces commodity price risk, particularly in propane operations, which are mitigated through storage activities and forward contracts [253]. - The regulated energy distribution operations have limited commodity price risk exposure due to fuel cost recovery mechanisms authorized by respective Public Service Commissions (PSCs) [252]. Inflation and Cost Management - Inflation impacts the costs of supply, labor, and services, prompting the company to seek rate increases from regulatory commissions to cope with these effects [260]. - The company utilizes interest rate swap agreements to mitigate risks associated with fluctuations in interest rates on long-term debt [251]. - Interest charges decreased by $0.7 million in Q1 2021 compared to Q1 2020, primarily due to lower interest expenses from reduced revolving credit [216].