Good morning. My name is Casey, and I will be your conference Operator today. At this time, I would like to welcome everyone to the Chesapeake Utilities 2017 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. Beth Cooper. You may begin your conference.

Good morning everyone. I would like welcome you to Chesapeake’s fourth quarter and year-end 2017 earnings conference call. Today's call is being hosted at our corporate office here in Dover, Delaware. Joining me in the room today are our President and CEO, Mike McMasters, other members of our senior leadership team and also other members of our management. Once again thank you for joining us. Turning to Slide 2 before we begin today's presentation, I first just like to make some references to the fact that our presentation today includes forward looking statement. I would ask that you refer to our annual report on Form 10-K, which was filed yesterday morning. To take a look at those, particular items that might cause our actual results to differ from the forward looking statement. I would also like to make a note that today's presentation does include certain references to non GAAP measures including gross margins and adjusted EPS. And now, what I would like to do, is turn our presentation over to Mike McMasters, who is going to begin with a discussion regarding our earnings for the year.

Thanks Beth. I guess on Slide 3, you will see our net income and for the full-year and also the fourth quarter, you will notice reported earnings of $58 million adjusted $47 million those adjustments are to reverse the impact of Tax Reform act and also to add back the unrealized mark-to-market loss. Again $58 million reported earnings, $47 million of adjusted earnings. On earnings per share basis that’s 355 and 289. On the fourth quarter, you will notice EPS reported $1.59 and then adjusted at $0.93. I guess one of the significant things with all of the changes that we are seeing primarily with the Tax Reform impacts and we have provided some guidance below. Our forecast of per share growth this year or 17% and that includes both Tax Reform and the other key projects. Turning now to Slide 4, I will discuss our diluted earnings per share first, what I would say is that the five-year compound annual growth rate of earnings per share is 12.3% in 10 years 10.7. If you make the same adjustments that we made in the prior slide that would be 7.7% EPS growth rate for five years and 8.4% for 10 years. If you look at our dividends per share, five year growth rate 6% the 10 year 5.2% what you can see is that our dividend growth rate is lower than our earnings per share growth rate which supports that dividend. Turning to Slide 5, again using adjusted earnings per share of 289, significant growth in all of our business if you look at the first bullet up there, significant growth in all of our operating businesses and based on our increase gross margin of $24.6 million and that excludes the unrealized mark-to-market, just as a benchmark, that $24.6 million…

Thanks Mike. Turning to Slide 6, Mike talked a little bit about the years’ result and I'm just going to spend a minute talking about the fourth quarter, because it was a very strong quarter for the Company. Once again, when you exclude those significant items which represented $0.66 on a net basis per share, you will see that our earnings per share in the fourth quarter grew from $0.73 to what would be $0.93 that $0.20 increase would represent a 27% increase quarter-over-quarter for the fourth quarter of the last year. Those results were primarily attributable to higher gross margins both in the regulated and unregulated energy segments again that representing $0.28 per share. Moving to Slide 7, you will see that we have got three slides here where we would like to spend some time talking about Tax Reform. The first slide includes the discussion of the key impact, the second one talks about where we stand within our various regulatory jurisdiction and the third slide I will just give some concluding remarks overall in regards to Tax Reform. Beginning with Slide 7, the first thing as you know, the new tax rate on the federal side became effective January 1st, but what that did was it resulted in us having a to revaluation of our differed taxes at the end of the year. On the regulated side that resulted in us establishing a regulatory liability equal to $98 million. On the unregulated side, that resulted in us being able to take in the earnings $14.3 million as net income or $0.87 per share. That revaluation on the unregulated side is a direct result of the investments that we have made in the last five years including Eight Flag, Aspire Energy transaction and the growth that’s occurred in…

Thanks Beth. Turning to Slide 13, the performance quadrant, what you will notice in the far right hand side corner, is that Chesapeake is continuing to maintain our position in that that top right hand quadrant, basically that’s driven off of strong returns on capital and also strong investments. The other is the side effect that this had was I think Beth mentioned a little bit earlier was it impacts that the Tax Reform benefits, there large level of CapEx coupled with bonus depreciation generated large deferred taxes, which we then were able to write in on the unregulated side of our business. Turning to Slide 14, what you are seeing first is Eastern Shore’s natural gas, capital investment of 117 million that’s a 2017 project, we are estimating $15.8 million in the first full-year of full operation, we recognized 433,000 in 2017, with the completion of the TETCO upgrade. In addition we got a lot of construction underway still, we expect to place those facilities into service throughout different periods in 2018. So by the end of 2018, we should completely finished with those projects. We are putting in 23 miles of pipeline looping. 17 miles of new mainline expansion, so I mentioned upgrade to the TETCO interconnect 3750 horsepower of new compression. In addition we are adding 61,162 dekatherms per day of capacity. Turning to Slide 15, with the Florida Natural Gas projects, first, the Northwest Pipeline expansion is a $35.9 million project, we are estimating $6 million in annual gross margin once it’s in service, we expect that to happen in the second quarter of 2018, it makes 38 miles of pipeline to our transmission and five miles of natural gas distribution. Customer commitments of 68,500 dekatherms per day with the total capacity of 80,000 dekatherms per…

Great, thank you. [Operator instructions]. And your first question comes from Insoo Kim with RBC capital Markets. Please go ahead. Your line is open.

Hi, good morning everyone. Thanks for providing some framework around your growth for 2018. The 17%-plus number that you guys gave, I guess, if you take out the Tax Reform benefit of $0.10 to $0.15, it should be more in that 13% to 14% range. And I guess is the assumption embedded in that growth just the projects and initiatives that you have already laid out for the year?

Yes. that is the case, Insoo. If there were additional projects that come along that aren't factored in to in our capital budget today, or you know, incremental opportunities on the unregulated side, those would be above and beyond, but it's what we have laid out right now.

Got it. And I know, on the financing side, you are set to issue about $100 million of long-term debt this year. I guess if that's the case, then that could potentially get your equity-to-cap ratio slightly below that targeted 50% to 60% range. Are you pretty set on trying to maintain that range.

We can, fall below that for a short period of time. You would not see us stay below for a long period of time. And I think, you know, as we see things right now and we have looked at our preliminary numbers for the year, what they show, right now, we are not forecasting, you know, an equity issuance this year, you could potentially see us access the debt capital markets again, given our current short-term borrowing levels. But you know, we are going to proceed through the year a little bit more and I would say into, you know, we are going to continue to reassess, we'll look at where the equity markets are, we'll see what an additional projects come to the table and then, you know, we may refine that as we continue to move through 2018.

Understood. And just one more question if I may. When you look out over the next few years of CapEx opportunities, are you seeing it being a collection of smaller investments across your businesses? Or are there some more material opportunities that could potentially be in the pipeline?

Yes, we are always looking for the larger opportunities, but we are also making sure that we are doing all the work underneath that. Whether it's the distribution growth in addition to the transmission growth and in addition, the unregulated company. So we, and we have a five year outlook, if you will, we go to our strategic planning process where we are constantly questioning our existing strategy and looking to see if there is other things that we should be doing to keep those opportunities in the pipeline. So yes, I think it’s going to be I guess I would say all of the above kind of thing. And we have got a strategic development team that’s focused on looking at things outside the footprint, and things that maybe a little bit different than overlooking at in our existing businesses, but we are also looking for our existing businesses to be creative and innovative as well.

Great. Thank you very much.

Thanks Insoo.

[Operator Instructions] Your next question comes from Spencer Joyce with Hilliard Lyons. Please go ahead. Your line is open.

Mike good morning, congrats on another really good quarter here. Just to may be piggyback on Insoo’s questions, thanks for that the 17% kind guidance type figure for this year, I guess I wanted to ask kind about the sensitivity there specifically the language kind 17% or more. Should we be thinking about 17 as kind of a lower bound or does the additive to 17 merely reflect potential projects that could come up during the year. Just trying to want to understand if were working with more of a base case or kind of the midpoint there.

I think Spencer in terms of that question, from a CapEx prospective. At this point, any sizable CapEx project that we are going to add are really going to be impacting 2019, but we put the process of just given the growth that we been able to see on the unregulated side and the things that we are doing there and so there is an opportunity for it to be more slightly more than that. But that will depend upon catching those growth opportunities also as well as I would say the fourth quarter in terms of the weather impact being second most weather sensitive. So I think as you are thinking about it, I would kind think about it as kind of that midpoint, but with those around it.

Okay that’s helpful. Maybe a similar question can ask a different way, so as you are new in kind of your internal modeling and backed into that 17% figure, what were some of the points of uncertainty, maybe aside from the weather, I mean is there still any kind of wiggle room on tax or is that field pretty locked in there, I mean is there anything obvious kind of operationally that we might be able to look to during the year, just maybe a few of the uncertainty points.

I think for the most part on the unregulated side, we captured what we think the impact will be, but to that extent as you know that earnings in those business vary from that, those are corresponding tax impact, so to speak that could get to the bottom line or even deduct from the bottom line, depending upon where those commence. So I think we feel like we have got good estimates there. On the regulated side, we are going in, we are discussing, where we are from a position standpoint with each of the regulatory jurisdiction, could there be something that comes out of that potentially and if so, we will certainly go through that with you. So I think we have kind of laid out, I think what we know today, our best estimate, but certainly depending on growth that comes in or any factors that change that could just slightly?

Spencer, what we are saying, if you go to the utility side of things, we are seeing more construction that we have seen in the past, it starting to ramp up. So there’s some things happening there that are positive. And then when you look at the unregulated side, we had some substantial growth in 2017 that because of the mark-to-market is getting masked. And so that kind of growth makes a little bit tougher for us to - actually gives us an opportunity to exceed the 2017 more than going backwards would be compression of margins in the propane for example of other markets or whether you mentioned the weather. But it’s really the opportunities that we can get from both the residential and commercial growth in our territories and the unregulated side of the business, but things that they are able to do that are just a little bit more flexible in the regulated side.

Final, I guess kind of housekeeping question. The capital budget for 2018, 180 million or so. I know typically you will have coming a little bit under the capital budget outline kind of earlier in the years. Should we be thinking about that kind of the same way this year? Is that 180 sort of the upper band, and then we will see what we can put in the ground kind of within the contacts is that still kind of a fair way to go?

Typically Spenser when we start out the year. We will come out of the year with our base capital budget and then we actually will have some items that is carry over from the prior year that may further add budget, which will drive it up and then we typically come back down closer to the original capital budget. So the number that you have right now with our original budget and I would say that’s a very good estimate of the likely amount that we will spent somewhere around there, because that does not at this point reflect some carryover dollars that are coming in some 2017 and moving to 2018. So I think that’s good for purposes of what you are going to factor into your models and it’s likely we are going to spend that amount this year.

Okay that’s good. And as kind of fresher. So absent kind of those the major growth initiatives. What is sort of run-rate for your base capital or kind of maintenance capital if you will. From this point last year, I kind of had a note that it was 60 million to 70 million. Is that still pretty close or is that maybe - a little bit higher?

That’s pretty close. Still running about that level, when we look at our budget for the period of time that we have projected that’s still is an estimate.

Okay, great. That’s all I needed. Thanks.

Thank you.

[Operator Instructions]. Your next question comes from Sarah Akers with Wells Fargo. Please go ahead. Your line is open.

Good morning. Just a question on PESCO. So on a percentage basis, it looks like gross margin was up over 70% in 2017. So can you expand on what drove that increase and if you consider that level of gross margin to be sustainable.

So, PESCO's gross margin actually came from multiple different sources through the year. If you'll recall in the beginning of the year, we talked a lot about, they participated in the Columbia Ohio Standard Choice Program. And there was growth that we had in margin that came from that program. Our legacy business in Florida also continue to have growth in that CNI portfolio and what we have been able to do there. We added the ARM acquisition in August and not only did the ARM acquisition at incremental revenue just from that acquisition, but then in addition to that, our producer services business and some of our ancillary services actually increased, because of the market that opened up for us both in Ohio as well as in Pennsylvania, So, you know, it wasn't really just one area of PESCO that grew, it was really across the board in multiple different areas.

Got it, great. And then lastly, just as we think about Q1 estimates, how has weather been in January, in February in your service territory?

Well, January, was a very good month from a weather perspective in terms of having cold temperatures, in fact we probably had a little bit too much for a few days, but in February I think I was hearing that Florida might have been a record warm, February. And so I think here is probably a little bit warm than normal too in February, But, as we compared to last year I would think that we are colder than last year.

Okay. But so the 17% growth, so that’s based on normal weather and given the cold in January and maybe a little bit warmer in February, it doesn't sound like you are necessarily running all that different to normal thus far.

That's correct.

Okay, thanks a lot.

Thanks Sarah.

And your next question comes from the line of Nate Martin with Seaport Global. Please go ahead. Your line is open.

Hey, good morning guys. And congrats on another good quarter. I think most of the topics I was thinking about have kind of been touched on, so maybe just a couple of housekeeping items. I think that you mentioned about the $100 million debt this year, what was the timing on that? Did you mention that, I might have missed it.

No problem. One tranche we are required to pull down by May and that's for $50 million Nate. And the second one, which is also a tranche of $50 million, we are require to pull that down by November. We can always pull it down earlier than that, but those are the required timeframes.

Got It. Got It. And then, the other question I had was regarding tax rate, I think I saw in the K you are expecting the effective tax rate for this year to be about 27.5%. Is that something that you kind of see going forward or any colors you give on that?

Sure. So, right now in terms of the projections that we have looked at. I mean, I would say that's a fair and reasonable number to use. As unregulated businesses in certain states grow, for example, Aspire you know, to the extent Aspire grows and becomes a larger part of the portfolio, you would see that overall rate decline, because Ohio doesn’t have a state income tax, and so there is a couple of our unregulated businesses like that, so it could come off of that a little bit and the expectation would probably be more that it might move down slightly, but like I said, I think as a starting point that’s a great number to use as you think about 2018.

Got it. Perfect. That’s all for me. Thanks guys.

Thank you.

There are no further questions in the queue at this time. I would turn the call back over to Mike for closing remarks.

Thank you very much. Well I want to thank everyone for their continued interest in our Company. We remain committed to generate value for our shareholders. Wish all to have a great weekend. Thank you.

Thank you.

And ladies and gentlemen, this concludes today’s conference call. You may now disconnect.