Chesapeake Utilities Q2 Earnings Call Highlights

Key Points

• Chesapeake Utilities raised its 2026 capital-spending guidance by $100 million to $550 million–$600 million, driven by higher regulated investment and initial spending on major infrastructure projects.
• The proposed $1.2 billion Florida Energy Pathway would build a 97-mile intrastate gas pipeline serving South Florida, with expected in-service in 2030 and nearly 250,000 decatherms per day of shipper commitments.
• Second-quarter adjusted net income rose 5% to about $25 million and adjusted EPS increased 1% to $1.05, while customer growth remained healthy and management reaffirmed its 2028 adjusted EPS target of $7.75–$8.00.

Chesapeake Utilities NYSE: CPK reported higher second-quarter adjusted earnings and raised its 2026 capital-spending outlook, citing continued customer growth, transmission and infrastructure investment, and the planned Florida Energy Pathway natural gas project.

Chair, President and Chief Executive Officer Jeff Householder said adjusted net income rose 5% in the first half of 2026, while adjusted earnings per share increased 8%. During the second quarter, the company generated an incremental $10 million of margin from growth in its transmission, infrastructure and distribution systems and invested $140 million of capital, bringing year-to-date investment to $262 million.

The company raised its full-year 2026 capital guidance by $100 million to a range of $550 million to $600 million. Householder said the increase reflects initial spending on the Florida Energy Pathway, or FEP, as well as higher regulated distribution and infrastructure investment.

Florida Energy Pathway Anchors Expanded Investment Plan

Chesapeake announced the FEP project in July. The proposed 97-mile intrastate natural gas transmission line would run from Palm Beach County to Miami-Dade County and is designed to address transmission constraints and increased natural gas demand in South Florida.

Householder described FEP as the largest single project in Chesapeake’s history, with total investment expected to be approximately $1.2 billion. Peninsula Pipeline Company, a Chesapeake subsidiary, will construct and operate the line and expects to fund and own at least 51% of the project. The company is discussing arrangements with potential partners that could fund and own up to 49%.

The project is expected to enter service in 2030 and has commitments from multiple investment-grade shippers for nearly 250,000 decatherms per day of capacity, according to Householder. Chesapeake is continuing to accept binding commitments from additional shippers.

In response to analyst questions, Householder said the partnership structure is intended to maintain a reasonable balance of risk for a project of FEP’s size. He said the company expects to invest roughly $600 million on its portion of the project before revenues begin in 2030.

Householder said FEP is regulated by the Florida Public Service Commission because it is an intrastate pipeline project. The company expects permitting to begin in earnest and said the route will largely use public rights of way through three South Florida counties, limiting the need for land acquisition.

The company now expects capital investment to exceed $2.2 billion from 2024 through 2028, up from its prior five-year range. Management plans to provide 2027-2031 capital-expenditure guidance and a 2027-2031 earnings growth rate during its full-year 2026 earnings call in February.

Second-Quarter Financial Results

Senior Vice President and Chief Financial Officer Jeff Sylvester said second-quarter adjusted gross margin rose 5% from a year earlier to approximately $150 million. Adjusted net income also increased 5% to approximately $25 million, while adjusted earnings per share rose 1% to $1.05. Sylvester said the smaller per-share increase reflected shares issued over the past year as the company moved toward its target capital structure.

Transmission expansion projects contributed $0.15 per share of adjusted earnings in the quarter, while infrastructure-program investment added $0.10 per share. Natural gas distribution demand contributed another $0.06 per share, and improved propane and Aspire performance added $0.06 per share.

Those gains were partly offset by increased depreciation, amortization and property-tax expenses associated with growing capital investment, along with higher facility, vehicle, insurance, collections, customer-service, payroll and benefit costs. Financing activity, including debt and equity issuances over the past 12 months, reduced adjusted EPS by $0.05, Sylvester said.

• Regulated segment adjusted gross margin increased 6% to about $125 million.
• Regulated operating income rose 7% to approximately $55 million.
• Unregulated energy segment adjusted gross margin increased 2% to roughly $25 million.
• First-half operational expenses represented 45% of gross margin, the company’s lowest level to date.

As of June 30, Chesapeake’s equity capitalization was 50%, and it had 70% of its $798 million total debt capacity available. The company also amended its revolving credit agreement, increasing total borrowing capacity by $200 million to $650 million. The revolver includes a $250 million, 364-day tranche and a $400 million, five-year tranche expiring in August 2031.

Customer Growth and Regulatory Developments

Householder said customer growth remained above average across Chesapeake’s service territories, with residential customer growth of 3% in Delmarva, 2.1% at Florida Public Utilities and 1.8% at Florida City Gas. He acknowledged a broader slowdown from peak housing-growth levels in recent years but said activity in the company’s markets remains healthy.

For Florida City Gas, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer Jim Moriarty said Chesapeake filed earlier this year for a base-rate adjustment of about $47 million and requested an 11.25% return on equity. The Florida Commission approved a $16 million annualized interim rate adjustment in late July, which Moriarty said is expected to generate more than $6 million of additional revenue in 2026.

Householder said the company would continue working with Florida Public Service Commission staff and the Office of Public Counsel, though he said Chesapeake is prepared to litigate the rate case if a settlement is not reached.

Project Updates and Outlook

Chesapeake said construction of its Worcester Resiliency Upgrade LNG storage facility remains on schedule, with the full project expected to be online early next year. The company expects its listed transmission projects to contribute about $33 million of gross margin in 2026 and an additional $51 million in 2027.

The company is also advancing permitting for its Delmarva Regional Enhancement project, with construction expected to begin next year. Chesapeake is conducting a feasibility analysis for potential gas service expansion in Accomack County, Virginia, and continues to evaluate property opportunities for LNG transportation and storage serving the Cape Canaveral and Port Canaveral area.

Sylvester reaffirmed Chesapeake’s 2028 adjusted EPS guidance of $7.75 to $8.00. The company also cited its 7.3% most recent annual dividend increase and said its next quarterly dividend payment will be $0.74 per share.

About Chesapeake Utilities (NYSE:CPK)

Chesapeake Utilities Corporation NYSE: CPK is a diversified energy services holding company headquartered in Dover, Delaware. Through its operating subsidiaries, the company engages in natural gas distribution, transmission and storage; propane distribution; wholesale propane supply; and contract compression and natural gas liquids processing. Its core mission is to provide safe, reliable and cost-effective energy solutions to residential, commercial and industrial customers across multiple U.S.

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