What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-03 compared with 2022-11-02 · 246 added, 435 removed, 621 unchanged (52% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Income (Unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

(in thousands, except shares and per share data)

4 unchanged sentences

Operating Expenses

Regulated natural gas and electric costs 21,248 15,294 88,264 72,785

Unregulated propane and natural gas costs 22,958 12,072 100,236 55,578

Natural gas and electric costs 55,288 45,442

Propane and natural gas costs 33,301 51,739

Operations 44,767 42,793

15 unchanged sentences

Diluted $ 2.04 $ 2.08

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

(in thousands)

2 unchanged sentences

Employee Benefits, net of tax:

Amortization of prior service cost, net of tax of $(5), $(5), $(15) and $(15), respectively ( 14 ) ( 14 ) ( 42 ) ( 42 )

Net gain, net of tax of $11, $28, $34 and $83, respectively 32 78 95 234

Reclassifications of amortization of prior service credit and actuarial loss, net of tax of $3 and $6, respectively 10 18

Cash Flow Hedges, net of tax:

Unrealized gain (loss) on commodity contract cash flow hedges, net of tax of $(1,111), $688, $(1,115) and $1,945, respectively ( 2,939 ) 1,803 ( 2,907 ) 5,094

Unrealized gain on interest rate swap cash flow hedges, net of tax of $54, $5, $54 and $6, respectively 153 14 153 18

Net gain on commodity contract cash flow hedges, net of tax of $7 and $937, respectively 22 2,498

Reclassifications of net (gain) on commodity contract cash flow hedges, net of tax $(166) and $(752), respectively ( 440 ) ( 1,969 )

Net (loss) on interest rate swap cash flow hedges, net of tax of $(52) and $0, respectively ( 148 ) —

Reclassifications of net (gain) on interest rate swap cash flow hedges, net of tax of $(17) and $0, respectively ( 48 ) —

Total Other Comprehensive Income (Loss), net of tax ( 604 ) 547

Comprehensive Income $ 35,740 $ 37,480

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

Assets September 30,

Assets March 31,

2023 December 31,

27 unchanged sentences

Investments, at fair value 10,866 10,576

Derivative assets, at fair value 898 982

Operating lease right-of-use assets 14,272 14,421

3 unchanged sentences

Total Assets $ 2,197,551 $ 2,215,037

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

Capitalization and Liabilities September 30,

Capitalization and Liabilities March 31,

2023 December 31,

6 unchanged sentences

Retained earnings 472,209 445,509

Accumulated other comprehensive income ( 1,398 ) 1,303

Accumulated other comprehensive income (loss) ( 1,983 ) ( 1,379 )

Deferred compensation obligation 8,816 7,060

12 unchanged sentences

Regulatory liabilities 10,556 5,031

Income taxes payable 7,554 —

Derivative liabilities, at fair value 798 585

6 unchanged sentences

Other pension and benefit costs 17,190 16,965

Derivative liabilities, at fair value 636 1,630

Operating lease - liabilities 12,110 12,392

3 unchanged sentences

Total Capitalization and Liabilities $ 2,197,551 $ 2,215,037

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

15 unchanged sentences

Accounts payable and other accrued liabilities ( 21,166 ) ( 12,918 )

Income taxes receivable ( 1,399 ) 183

Income taxes receivable/payable 10,095 6,134

Customer deposits and refunds ( 476 ) ( 3,114 )

5 unchanged sentences

Proceeds from sale of assets 506 219

Acquisitions, net of cash acquired ( 2,006 ) —

Environmental expenditures ( 742 ) ( 267 )

5 unchanged sentences

Change in cash overdrafts due to outstanding checks ( 323 ) 1,223

Net advances (repayments) under line of credit agreements ( 54,289 ) 16,392

Net repayments under line of credit agreements ( 107,755 ) ( 82,008 )

Proceeds from long-term debt, net of offering fees 79,840 49,915

4 unchanged sentences

Cash and Cash Equivalents—End of Period $ 3,065 $ 5,208

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Chesapeake Utilities Corporation and Subsidiaries

8 unchanged sentences

Compensation Treasury

Balance at June 30, 2021 17,567,928 $ 8,550 $ 357,520 $ 374,936 $ 558 $ 7,203 $ ( 7,203 ) $ 741,564

Net income — — — 12,475 — — — 12,475

Other comprehensive income — — — — 1,881 — — 1,881

Dividend declared ($0.480 per share) — — — ( 8,514 ) — — — ( 8,514 )

Dividend reinvestment plan 19,906 10 2,441 — — — — 2,451

Share-based compensation and tax benefit (3)(4)

— — 1,105 — — — — 1,105

Treasury stock activities — — — — — ( 17 ) 17 —

Balance at September 30, 2021 17,587,834 $ 8,560 $ 361,066 $ 378,897 $ 2,439 $ 7,186 $ ( 7,186 ) $ 750,962

Balance at December 31, 2021 17,655,410 $ 8,593 $ 371,162 $ 393,072 $ 1,303 $ 7,240 $ ( 7,240 ) $ 774,130

2 unchanged sentences

Dividends declared ($0.480 per share) — — — ( 8,661 ) — — — ( 8,661 )

Dividend reinvestment plan 80,022 39 9,247 — — — — 9,286

Share-based compensation and tax benefit (3) (4)

45,971 22 3,337 — — — — 3,359

Treasury stock activities — — — — — 1,507 ( 1,507 ) —

Balance at September 30, 2021 17,587,834 $ 8,560 $ 361,066 $ 378,897 $ 2,439 $ 7,186 $ ( 7,186 ) $ 750,962

Balance at June 30, 2022 17,734,794 $ 8,632 $ 376,866 $ 428,833 $ 1,370 $ 7,018 $ ( 7,018 ) $ 815,701

Net income — — — 9,662 — — — 9,662

Other comprehensive loss — — — — ( 2,768 ) — — ( 2,768 )

Dividend declared ($0.535 per share) — — — ( 9,554 ) — — — ( 9,554 )

Issuance under various plans (5)

3 unchanged sentences

Treasury stock activities — — — — — ( 763 ) 763 —

Balance at September 30, 2022 17,738,785 $ 8,634 $ 378,261 $ 428,941 $ ( 1,398 ) $ 7,003 $ ( 7,003 ) $ 814,438

Balance at March 31, 2022 17,719,388 $ 8,624 $ 373,694 $ 421,344 $ 1,850 $ 6,477 $ ( 6,477 ) $ 805,512

Balance at December 31, 2022 17,741,418 $ 8,635 $ 380,036 $ 445,509 $ ( 1,379 ) $ 7,060 $ ( 7,060 ) $ 832,801

7 unchanged sentences

Treasury stock activities — — — — — 1,756 ( 1,756 ) —

Balance at September 30, 2022 17,738,785 $ 8,634 $ 378,261 $ 428,941 $ ( 1,398 ) $ 7,003 $ ( 7,003 ) $ 814,438

Balance at March 31, 2023 17,789,856 $ 8,659 $ 379,703 $ 472,209 $ ( 1,983 ) $ 8,816 $ ( 8,816 ) $ 858,588

(1) 2,000,000 shares of preferred stock at $ 0.01 par value have been authorized.

1 unchanged sentence

accordingly, no information has been included in the statements of stockholders’ equity.

(2) Includes 107,659 , 116,238 , 114,016 , and 105,087 shares at September 30, 2022, December 31, 2021, September 30, 2021 and December 31, 2020, respectively, held in a Rabbi Trust related to our Non-Qualified Deferred Compensation Plan.

(2) Includes 109,687 , 108,143 , 107,518 , and 116,238 shares at March 31, 2023, December 31, 2022, March 31, 2022 and December 31, 2021, respectively, held in a Rabbi Trust related to our Non-Qualified Deferred Compensation Plan.

(3) Includes amounts for shares issued for directors’ compensation.

(4) The shares issued under the SICP are net of shares withheld for employee taxes.

For the nine months ended September 30, 2022 and 2021, we withheld 21,832 and 14,020 shares, respectively, for employee taxes.

For the three months ended March 31, 2023 and 2022, we withheld 19,859 and 21,832 shares, respectively, for employee taxes.

(5) Can include shares issued under the Retirement Savings Plan, DRIP and ATM equity issuances.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

N OTES TO C ONDENSED C ONSOLIDATED F INANCIAL S TATEMENTS (U NAUDITED)

9 unchanged sentences

Revenue and earnings are typically greater during the first and fourth quarters, when consumption of energy is highest due to colder temperatures.

Effects of COVID-19

In March 2020, the 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 beginning in 2020 and to a lesser extent have continued into 2022.

Chesapeake Utilities is considered an “essential business,” which allowed us to continue operational activities and construction projects while social distancing restrictions were in place.

At this time, restrictions have predominantly been lifted as vaccines have become widely available in the United States.

Previously existing states of emergency in all of our service territories expired during the second and third quarters of 2021 eliminating a majority of restrictions initially implemented to slow the spread of the virus.

The expiration of the states of emergency along with the settlement of our limited proceeding in Florida concluded our ability to defer incremental pandemic related costs for consideration through the applicable regulatory process.

We adjusted our operating practices accordingly to ensure the safety of our operations and will take the necessary actions to comply with the CDC, and the Occupational and Safety and Health Administration, as new developments occur.

Refer to Note 5, Rates and Other Regulatory Activities , for further information on the regulated assets established as a result of the incremental expenses associated with COVID-19.

FASB Statements and Other Authoritative Pronouncements

Recently Adopted Accounting Standards

Reference Rate Reform - (ASC 848) - In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which was subsequently amended by ASU 2021-01.

The standard provides relief for companies preparing for the discontinuation of interest rates, such as LIBOR, and allows optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform.

The amendments included in this ASU are to be applied prospectively, and are not expected to have a material impact on our financial position or results of operations.

Refer to Note 16, Short-Term Borrowings, for further information related to our implementation of this update.

Recent Accounting Standards Yet to be Adopted

There are no new accounting pronouncements that are applicable to us.

Recent Accounting Standards

There are no pending or recently effective accounting standards which have had, or are expected to have, a material impact to our consolidated financial statements or disclosures.

Calculation of Earnings Per Share

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

(in thousands, except shares and per share data)

11 unchanged sentences

Acquisition of Davenport Energy

On June 13, 2022, Sharp acquired the propane operating assets of Davenport Energy's Siler City propane division for approximately $ 2.0 million.

In connection with this acquisition, we recorded a $ 0.1 million liability which is subject to the seller's adherence to various provisions contained in the purchase agreement through the first anniversary of the transaction closing.

Included with the acquisition was less than $ 0.1 million of working capital from the Seller consisting predominantly of accounts receivable and propane inventory.

Through this acquisition, the Company expands its operating footprint further into North Carolina, where customers will be served by Sharp Energy’s Diversified Energy division.

Sharp added approximately 850 customers, along with expected distribution of approximately 0.4 million gallons of propane annually.

In June 2022, Sharp acquired the propane operating assets of Davenport Energy's Siler City, North Carolina propane division for approximately $ 2.0 million.

Through this acquisition, we expanded our operating footprint further into North Carolina, where customers are served by Sharp Energy’s Diversified Energy division.

approximately 850 customers, along with distribution of approximately 0.4 million gallons of propane annually.

We recorded $ 1.5 million in property plant and equipment, $ 0.5 million in goodwill, and immaterial amounts associated with customer relationships and non-compete agreements, all of which are deductible for income tax purposes.

The amounts recorded in conjunction with the acquisition are preliminary, and subject to adjustment based on contractual provisions and finalization prior to the first anniversary of the transaction closing.

The financial results associated with this acquisition will be included within Sharp's Diversified Energy division, primarily as a result of their geographic proximity, as well as other synergies they generate due to their service territory.

Acquisition of Diversified Energy

On December 15, 2021, Sharp acquired the propane operating assets of Diversified Energy for approximately $ 37.5 million, net of cash acquired.

In connection with this acquisition, we recorded a $ 2.1 million liability which is subject to the seller's adherence to various provisions contained in the purchase agreement through the first anniversary of the transaction closing.

Included with the acquisition, was approximately $ 1.7 million of working capital from the Seller consisting predominantly of accounts receivable and propane inventory.

We accounted for this acquisition as a business combination within our Unregulated Energy Segment beginning in the fourth quarter of 2021.

In January 2022, we recorded a post-closing true-up of $ 0.8 million related to the provision for working capital valuation at the time of closing.

There were multiple strategic benefits to this acquisition including it:

(i) expands our propane service territory into North Carolina and South Carolina (ii) builds upon our existing propane presence in Virginia and Pennsylvania, and (iii) includes an established customer base with opportunities for future growth.

Through this acquisition, the Company added approximately 19,000 residential, commercial and agricultural customers, along with expected distribution of approximately 10.0 million gallons of propane annually.

In connection with this acquisition, we recorded $ 23.1 million in property plant and equipment, $ 6.2 million in intangible assets associated with customer relationships and non-compete agreements and $ 5.9 million in goodwill, all of which is deductible for income tax purposes.

These acquisitions generated operating revenue and operating loss of $ 3.8 million and $ 0.8 million, respectively, for the three months ended September 30, 2022 .

For the nine months ended September 30, 2022, the acquisitions generated operating revenue and operating loss of $ 18.1 million and $ 0.2 million, respectively.

The financial results associated with this acquisition are included within our propane distribution operations within our Unregulated Energy segment.

Acquisition of Planet Found Energy Development

In October 2022, we acquired Planet Found Energy Development, LLC for $ 9.5 million.

In October 2022, we acquired Planet Found Energy Development, LLC ("Planet Found") for $ 9.5 million.

In connection with this acquisition, we recorded a $ 0.9 million liability which is subject to the seller's adherence to various provisions contained in the purchase agreement through the first anniversary of the transaction closing.

We accounted for this acquisition as a business combination within our Unregulated Energy segment beginning in the fourth quarter of 2022.

1 unchanged sentence

The transaction will accelerate our efforts in converting poultry waste to renewable, sustainable energy while simultaneously improving the local environments in our service territories.

The operating revenues and operating income of this acquisition will be included in our financial results beginning in the fourth quarter of 2022.

The operating revenues and operating income of Planet Found were not material to our consolidated results for the three months ended March 31, 2023.

In connection with this acquisition, we recorded $ 4.4 million in intangible assets associated primarily with intellectual property and non-compete agreements, $ 4.0 million in property plant and equipment, $ 1.1 million in goodwill, and less than $ 0.1 million in working capital, all of which are deductible for income tax purposes.

Revenue Recognition

2 unchanged sentences

Typically, our customers pay for the goods and/or services we provide in the month following the satisfaction of our performance obligation.

The following table displays our revenue by major source based on product and service type for the three months ended September 30, 2022 and 2021:

Three months ended September 30, 2022 Three months ended September 30, 2021

The following table displays our revenue by major source based on product and service type for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

(in thousands) Regulated Energy Unregulated Energy Other and Eliminations Total Regulated Energy Unregulated Energy Other and Eliminations Total

1 unchanged sentence

Delaware natural gas division $ 36,907 $ — $ — $ 36,907 $ 34,481 $ — $ — $ 34,481

Florida natural gas division 9,207 — — 9,207 8,015 — — 8,015

FPU electric distribution 25,199 — — 25,199 23,121 — — 23,121

FPU natural gas distribution 26,627 — — 26,627 22,012 — — 22,012

Maryland natural gas division 2,881 — — 2,881 2,432 — — 2,432

Sandpiper natural gas/propane operations 3,893 — — 3,893 3,553 — — 3,553

Elkton Gas 1,168 — — 1,168 915 — — 915

Total energy distribution 77,716 — — 77,716 67,897 — — 67,897

Energy transmission

Aspire Energy — 10,022 — 10,022 — 5,255 — 5,255

Aspire Energy Express 373 — — 373 47 — — 47

Eastern Shore 18,804 — — 18,804 18,558 — — 18,558

Peninsula Pipeline 6,813 — — 6,813 6,776 — — 6,776

Total energy transmission 25,990 10,022 — 36,012 25,381 5,255 — 30,636

Energy generation

Eight Flags — 7,414 — 7,414 — 4,583 — 4,583

Propane operations

Propane delivery operations — 27,923 — 27,923 — 20,680 — 20,680

Compressed Natural Gas Services

Marlin Gas Services — 2,642 — 2,642 — 1,678 — 1,678

Other and eliminations

Eliminations ( 12,726 ) ( 87 ) ( 7,886 ) ( 20,699 ) ( 12,882 ) ( 87 ) ( 5,302 ) ( 18,271 )

Other — — 45 45 — — 132 132

Total other and eliminations ( 12,726 ) ( 87 ) ( 7,841 ) ( 20,654 ) ( 12,882 ) ( 87 ) ( 5,170 ) ( 18,139 )

Total operating revenues (1)

Florida natural gas distribution (1)

46,358 — — 46,358 40,286 — — 40,286

(1) Total operating revenues include other revenue (revenues from sources other than contracts with customers) of $ 0.1 million for both of our Regulated and Unregulated Energy segments, respectively for all periods presented above.

The sources of other revenues include revenue from alternative revenue programs related to revenue normalization for the Maryland division and Sandpiper Energy and late fees.

The following table displays our revenue by major source based on product and service type for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

(in thousands) Regulated Energy Unregulated Energy Other and Eliminations Total Regulated Energy Unregulated Energy Other and Eliminations Total

Energy distribution

Delaware natural gas division $ 56,308 $ — $ — $ 56,308 $ 51,188 $ — $ — $ 51,188

Florida natural gas division 29,093 — — 29,093 25,417 — — 25,417

FPU electric distribution 22,737 — — 22,737 19,089 — — 19,089

FPU natural gas distribution 82,463 — — 82,463 72,032 — — 72,032

Maryland natural gas division 12,263 — — 12,263 10,464 — — 10,464

20 unchanged sentences

$ 142,270 $ 83,166 $ ( 7,307 ) $ 218,129 $ 127,891 $ 101,292 $ ( 6,303 ) $ 222,880

( 1) Total operating revenues for the nine months ended September 30, 2022, include other revenue (revenues from sources other than contracts with customers) of $ 0.2 million for Regulated and $ 0.3 million Unregulated Energy segments, respectively, and $( 0.1 ) million and $ 0.3 million for our Regulated and Unregulated Energy segments, respectively, for the nine months ended September 30, 2021.

(1) In accordance with the Florida PSC approval of our natural gas base rate proceeding, effective March 1, 2023, our natural gas distribution businesses in Florida (FPU, FPU-Indiantown division, FPU-Fort Meade division and Chesapeake Utilities' CFG division, collectively, “Florida natural gas distribution businesses”) have been consolidated for rate-making purposes and amounts above are now being presented on a consolidated basis consistent with the final rate order.

(2) Total operating revenues for the three months ended March 31, 2023 include other revenue (revenues from sources other than contracts with customers) of $ 0.6 million and $ 0.1 million for our Regulated and Unregulated Energy segments, respectively and $ 0.1 million for both our Regulated and Unregulated Energy segments, respectively, for the three months ended March 31, 2022.

The sources of other revenues include revenue from alternative revenue programs related to revenue normalization for the Maryland division and Sandpiper Energy and late fees.

1 unchanged sentence

The timing of revenue recognition, customer billings and cash collections results in trade receivables, unbilled receivables (contract assets), and customer advances (contract liabilities) in our condensed consolidated balance sheets.

The balances of our trade receivables, contract assets, and contract liabilities as of September 30, 2022 and December 31, 2021 were as follows:

The balances of our trade receivables, contract assets, and contract liabilities as of March 31, 2023 and December 31, 2022 were as follows:

Trade Receivables Contract Assets (Current) Contract Assets (Non-current) Contract Liabilities (Current)

10 unchanged sentences

Our performance obligation is satisfied over the term of the respective customer retail program on a ratable basis.

For the three months ended September 30, 2022 and 2021, we recognized revenue of $ 0.3 million and $ 0.2 million, respectively.

For the nine months ended September 30, 2022 and 2021, we recognized revenue of $ 1.0 million and $ 0.8 million, respectively.

For the three months ended March 31, 2023 and 2022, we recognized revenue of $ 0.2 million and $ 0.4 million, respectively.

Remaining Performance Obligations

Our businesses have long-term fixed fee contracts with customers in which revenues are recognized when performance obligations are satisfied over the contract term.

Revenue for these businesses for the remaining performance obligations, at September 30, 2022, are expected to be recognized as follows:

Revenue for these businesses for the remaining performance obligations, at March 31, 2023, are expected to be recognized as follows:

(in thousands) 2023 2024 2025 2026 2027 2028 2029 and thereafter

7 unchanged sentences

and Peninsula Pipeline and Aspire Energy Express, our intrastate pipeline subsidiaries, are subject to regulation (excluding cost of service) by the Florida PSC and Public Utilities Commission of Ohio, respectively.

See the discussion below under COVID-19 impact .

Refer to the below discussion pertaining to the COVID-19 impact and Customer Information System Regulatory Asset Petition.

Customer Information System Regulatory Asset Petition:

In July 2022, we filed a joint petition for our natural gas divisions in Maryland (Maryland Division, Sandpiper, and Elkton Gas) for the approval to establish a regulatory asset for non-capitalizable expenses related to the set-up and implementation of the Company’s new Customer Information System ("CIS") system.

In July 2022, we filed a joint petition for our natural gas divisions in Maryland (Maryland Division, Sandpiper, and Elkton Gas) for the approval to establish a regulatory asset for non-capitalizable expenses related to the initial development and implementation of our new Customer Information System ("CIS") system.

The petition was approved by the Maryland PSC in August 2022.

A similar petition for our Florida Regulated Energy business units was filed during the same time frame and has not yet been scheduled on the Florida PSC Agenda.

The Delaware Division has previously received approval for this accounting treatment.

We have evaluated and selected the CIS with implementation which is anticipated to begin during the first quarter of 2023 and is expected to be completed in the first quarter of 2025.

A similar petition for our Florida Regulated Energy businesses was filed during the same time frame and was initially denied.

The Florida PSC subsequently approved capitalization of these expenses.

Additionally, our Delaware Division has the ability to defer these costs as a regulatory asset.

We have completed the system selection process and the CIS implementation began during the first quarter of 2023.

Ocean City Maryland Reinforcement:

2 unchanged sentences

The project will increase the reliability of the existing distribution system in those areas while also expanding infrastructure to serve new customers.

Construction has been initiated with estimated completion in late 2022 or early 2023.

Strategic Infrastructure Development and Enhancement (“STRIDE”) Plan:

In March 2021, Elkton Gas filed a STRIDE plan with the Maryland PSC.

The STRIDE plan accelerates Elkton Gas' Aldyl-A pipeline replacement program as costs of the plan are recovered through a fixed charge rider which is effective for five years.

Under the Elkton Gas STRIDE plan, the Aldyl-A pipelines will be fully replaced by the end of 2023.

In July 2021, Elkton Gas reached a settlement with the Maryland PSC Staff and the Maryland Office of Public Counsel that approved the Elkton Gas STRIDE plan.

This plan allows for recovery of the associated revenue requirement through a monthly surcharge, which was implemented effective September 2021.

We filed the annual STRIDE plan update with the Maryland PSC on November 1, 2021, which was approved for new rates effective January 1, 2022.

Construction has been initiated with estimated completion in the first half of 2023.

Wildlight Expansion:

In August 2022, Peninsula Pipeline and FPU filed a joint petition with the Florida PSC for approval of the Transportation Service Agreement between the parties associated with the Wildlight Expansion project.

The Wildlight Expansion project will further enable us to meet the significant growing demand for service in Yulee, Florida.

The Agreement and project have been structured to allow us to build the project alongside the construction and development of the area, and charge the reservation rate as each phase of the project goes into service.

The Agreement reflects the construction of pipeline facilities in two separate phases.

Phase one will consist of three extensions with associated facilities, and a gas injection interconnect with associated facilities.

In August 2022, Peninsula Pipeline and FPU filed a joint petition with the Florida PSC for approval of its Transportation Service Agreement associated with the Wildlight planned community located in Nassau County, Florida.

The project enables us to meet the significant growing demand for service in Yulee, Florida.

The agreement will enable us to construct the project during the build-out of the community, and charge the reservation rate as each phase of the project goes into service.

Construction of the pipeline facilities will occur in two separate phases.

Phase one consists of three extensions with associated facilities, and a gas injection interconnect with associated facilities.

Phase two will consist of two additional pipeline extensions.

The various phases of the project are anticipated to be placed in service beginning in the first quarter of 2023, with construction on the overall project continuing through 2025.

We anticipate that the Agreement will be included on the November 2022 Florida PSC agenda.

The various phases of the project commenced in the first quarter of 2023, with construction on the overall project continuing through 2025.

The petition was approved by the Florida PSC in November 2022.

Natural Gas Rate Case:

In May 2022, our natural gas distribution businesses in Florida, FPU, FPU-Indiantown division, FPU-Fort Meade division and Chesapeake Utilities CFG division (collectively, “Florida natural gas distribution businesses”) filed a consolidated natural gas rate case with the Florida PSC.

In connection with the application, we are seeking approval of the following:

(i) interim rate relief of approximately $ 7.2 million, subject to refund, pending the outcome of the rate case proceeding;

(ii) permanent rate relief of approximately $ 24.1 million, effective January 1, 2023, (iii) a depreciation study also submitted with filing;

(iv) authorization to make certain changes to tariffs to include the consolidation of rates and rate structure across the businesses and to unify the Florida natural gas distribution businesses under FPU;

(v) authorization to retain the acquisition adjustment recorded at the time of the FPU merger in our revenue requirement;

and (vi) authorization to establish an environmental remediation surcharge for the purposes of addressing future expected remediation costs for FPU MGP sites.

In May 2022, our natural gas distribution businesses in Florida filed a consolidated natural gas rate case with the Florida PSC.

The application included a request for the following:

(i) permanent rate relief of approximately $ 24.1 million, effective January 1, 2023, (ii) a depreciation study also submitted with filing;

(iii) authorization to make certain changes to tariffs to include the consolidation of rates and rate structure across the businesses and to unify the Florida natural gas distribution businesses under FPU;

(iv) authorization to retain the acquisition adjustment recorded at the time of the FPU merger in our revenue requirement;

and (v) authorization to establish an environmental remediation surcharge for the purposes of addressing future expected remediation costs for FPU MGP sites.

In August 2022, interim rates were approved by the Florida PSC in the amount of approximately $ 7.7 million on an annualized basis, effective for all meter readings in September 2022.

The interim rates are subject to refund pending the final outcome of the rate case proceeding.

The discovery process concluded in early October 2022 and the hearings for the proceeding were held later in the month.

Briefs for the proceeding will be due in late November 2022.

The outcome of the application is subject to review and approval by the Florida PSC.

Winter Haven Expansion Project:

In May 2021, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with CFG for an incremental 6,800 Dts/d of firm service in the Winter Haven, Florida area.

As part of this agreement, Peninsula Pipeline constructed a new interconnect with FGT and a new

regulator station for CFG.

This additional firm service is supporting new incremental load due to growth, including providing service to a new can manufacturing facility, as well as providing reliability and operational benefits to CFG’s existing distribution system in the area.

In connection with Peninsula Pipeline’s new regulator station, CFG also extended its distribution system to connect to the new station.

The Transportation Service Agreement was approved by the Florida PSC in September 2021 and the project was placed in service during the third quarter of 2022.

The discovery process and subsequent hearings were concluded during the fourth quarter of 2022 and briefs were submitted during the same quarter of 2022.

In January 2023, the Florida PSC approved the application for consolidation and permanent rate relief of approximately $ 17.2 million on an annual basis.

Actual rates in connection with the rate relief were approved by the Florida PSC in February 2023 with an effective date of March 1, 2023.

Beachside Pipeline Extension:

In June 2021, Peninsula Pipeline and Florida City Gas entered into a Transportation Service Agreement for an incremental 10,176 Dts/d of firm service in Indian River County, Florida, to support Florida City Gas’ growth along the Indian River's barrier island.

As part of this agreement, Peninsula Pipeline will construct 11.3 miles of pipeline from its existing pipeline in the Sebastian, Florida area, which will travel east under the Intercoastal Waterway ("ICW") and southward on the barrier island.

As required by Peninsula Pipeline’s tariff and Florida Statutes, Peninsula Pipeline filed the required company and customer affidavits with the Florida PSC in June 2021.

Construction commenced in June 2021 and the expected in-service date is during the first quarter of 2023.

As part of this agreement, Peninsula Pipeline constructed 11.3 miles of pipeline from its existing pipeline in the Sebastian, Florida area, traveling east under the Intercoastal Waterway and southward on the barrier island.

The project was placed in-service during April 2023.

St.Cloud / Twin Lakes Expansion:

In July 2022, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with our Florida natural gas division, FPU, for an additional 2,400 Dt/d of firm service in the St.

In July 2022, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU, for an additional 2,400 Dt/d of firm service in the St.

Cloud, Florida area.

6 unchanged sentences

In 2020, the Florida PSC implemented the Storm Protection Plan ("SPP") and Storm Protection Plan Cost Recovery Clause ("SPPCRC") rules, which require electric utilities to petition the Florida PSC for approval of a Transmission and Distribution Storm Protection Plan that covers the utility’s immediate 10-year planning period with updates to the plan at least every 3 years.

The SPPCRC rules allow the utility to file for recovery of associated costs related to its SPP.

Our Florida electric distribution operation’s SPP plan was filed in April 2022, and hearings were held in August 2022.

The SPP was approved with modifications by the Florida PSC on October 4, 2 022.

The SPPCRC was filed in May 2022 with requested rates effective January 1, 2023.

The SPPCRC hearing is scheduled for November 2022.

The SPPCRC rules allow the utility to file for recovery of associated costs for the SPP.

Our Florida electric distribution operation’s SPP plan was filed during the first quarter of 2022 and approved in the fourth quarter of 2022 with modifications, by the Florida PSC.

Rates associated with this initiative were effective in January 2023.

Lake Wales Pipeline Acquisition :

In February 2022, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with FPU for an additional 9,000 Dt/d of firm service in the Lake Wales, Florida area.

Approval of the agreement by the Florida PSC will enable Peninsula Pipeline to begin executing on the acquisition of an existing pipeline in the area that will be utilized to serve our current natural gas customers as well as new customers.

The Commission approved the petition in April 2023.

In February 2023, FPU filed a petition with the Florida PSC for approval of the GUARD program.

GUARD is a proposed ten-year program to enhance the safety, reliability and accessibility of portions of our natural gas distribution system.

FPU has identified various categories of eligible projects to be included in GUARD, which includes the relocation of mains and service lines located in rear easements and other difficult to access areas to the front of the street;

the replacement of problematic distribution mains, service lines and M&R equipment;

and system reliability projects.

The petition is currently under review by the Florida PSC.

Eastern Shore

Southern Expansion Project:

In January 2022, Eastern Shore submitted a prior notice filing with the FERC pursuant to blanket certificate procedures, regarding its proposal to install an additional compressor unit and related facilities at Eastern Shore's existing compressor station in Bridgeville, Sussex County, Delaware.

The project will enable Eastern Shore to provide additional firm natural gas transportation service to an existing shipper on Eastern Shore's pipeline system, with a projected in-service date in the fourth quarter of 2023.

We are currently awaiting an order from the FERC on this filing.

In January 2022, Eastern Shore submitted a prior notice filing with the FERC pursuant to blanket certificate procedures, regarding its proposal to install an additional compressor unit and related facilities at Eastern Shore's compressor station in Bridgeville, Sussex County, Delaware.

The project will enable Eastern Shore to provide additional firm natural gas transportation service to an existing shipper on its pipeline system.

The project obtained FERC approval in December 2022, and is under construction, estimated to go into service in the fourth quarter of 2023.

Capital Cost Surcharge :

In June 2021, Eastern Shore submitted a filing with the FERC regarding a capital cost surcharge to recover capital costs associated with two mandated highway relocation projects that required the replacement of existing Eastern Shore facilities.

The capital cost surcharge was an approved item in Eastern Shore’s last rate case.

In conjunction with the filing of this surcharge, pursuant to the settlement agreement, a cumulative adjustment to the existing surcharge to reflect additional depreciation was included in this filing.

The FERC issued an order approving the surcharge as filed on July 7, 2021.

The combined revised surcharge became effective July 15, 2021.

In December 2022, Eastern Shore submitted a filing with the FERC regarding a capital cost surcharge to recover capital costs associated with the replacement of existing Eastern Shore facilities as a result of mandated highway relocation projects as well as compliance with a Pipeline and Hazardous Materials Safety Administration ("PHMSA") regulation.

The capital cost surcharge mechanism was approved in Eastern Shore’s last rate case.

In conjunction with the filing of this surcharge, a cumulative adjustment to the existing surcharge to reflect additional depreciation was included.

The FERC issued an order approving the surcharge as filed on December 19, 2022.

The combined revised surcharge became effective January 1, 2023.

COVID-19 Impact

4 unchanged sentences

In response to the COVID-19 pandemic and related restrictions, we experienced reduced consumption of energy largely in the commercial and industrial sectors, higher bad debt expenses and incremental expenses associated with COVID-19, including expenditures associated with personal protective equipment and premium pay for field personnel.

The additional operating expenses we incurred supported the ongoing delivery of our essential services during these unprecedented times.

The additional operating expenses we incurred supported the ongoing delivery of our essential services during the height of the pandemic.

In April and May 2020, we were authorized by the Maryland and Delaware PSCs, respectively, to record regulatory assets for COVID-19 related costs which offered us the ability to seek recovery of those costs.

1 unchanged sentence

The order allowed us to establish a regulatory asset in a total amount of $ 2.1 million as of June 30, 2021 for natural gas and electric distribution operations.

The regulatory asset is being amortized over two years and is recovered through the Purchased Gas Adjustment and Swing Service mechanisms for our natural gas distribution businesses and through the Fuel Purchased Power Cost Recovery clause for our electric division.

As of September 30, 2022 and December 31, 2021, our total COVID-19 regulatory asset balance was $ 1.5 million and $ 2.3 million, respectively.

The regulatory asset is being amortized over two years and is

recovered through the Purchased Gas Adjustment and Swing Service mechanisms for our natural gas distribution businesses and through the Fuel Purchased Power Cost Recovery clause for our electric division.

As of March 31, 2023 and December 31, 2022, our total COVID-19 regulatory asset balance was $ 1.0 million and $ 1.2 million, respectively.

In 2021 and 2022, restrictions were gradually lifted as vaccines became widely available in the United States.

The various state of emergencies associated with the COVID-19 pandemic that were previously declared in our service territories have been terminated and we have adjusted our operating practices accordingly to ensure the safety of our operations and will take the necessary actions to comply with the CDC, and the Occupational Safety and Health Administration, as new developments occur.

Summary TCJA Table

Customer rates for our regulated businesses were adjusted as approved by the regulators, prior to 2020 with the exception of Elkton Gas;

which implemented a one-time bill credit in May 2020.

The following table summarizes the regulatory liabilities related to accumulated deferred taxes ("ADIT") associated with TCJA for our regulated businesses as of September 30, 2022 and December 31, 2021:

Customer rates for our regulated businesses were adjusted, as approved by the regulators, prior to 2020 with the exception of Elkton Gas, which implemented a one-time bill credit in May 2020.

The following table summarizes the regulatory liabilities related to accumulated deferred taxes ("ADIT") associated with TCJA for our regulated businesses as of March 31, 2023 and December 31, 2022:

Amount (in thousands)

Operation and Regulatory Jurisdiction September 30, 2022 December 31, 2021 Status

Operation and Regulatory Jurisdiction March 31, 2023 December 31, 2022 Status

Eastern Shore (FERC) $ 34,190 $ 34,190 Will be addressed in Eastern Shore's next rate case filing.

2 unchanged sentences

Sandpiper Energy (Maryland PSC) $ 3,570 $ 3,597 PSC approved amortization of ADIT in May 2018.

Chesapeake Florida natural gas division/CFG (Florida PSC) $ 7,892 $ 8,032 PSC issued order authorizing amortization and retention of net ADIT liability by the Company in February 2019.

FPU natural gas (excludes Fort Meade and Indiantown) (Florida PSC) $ 19,029 $ 19,189 Same treatment on a net basis as Chesapeake Florida Gas Division (above).

FPU Fort Meade and Indiantown natural gas divisions (Florida PSC) $ 262 $ 271 Same treatment on a net basis as Chesapeake Florida Gas Division (above).

Florida natural gas distribution (Florida PSC) (1)

$ 26,999 $ 27,179 PSC issued order authorizing amortization and retention of net ADIT liability by the Company in February 2019.

FPU electric division (Florida PSC) $ 4,934 $ 4,993 In January 2019, PSC issued order approving amortization of ADIT through purchased power cost recovery, storm reserve and rates.

Elkton Gas (Maryland PSC) $ 1,051 $ 1,059 PSC approved amortization of ADIT in March 2018.

(1) In accordance with the Florida PSC approval of our natural gas base rate proceeding, effective March 1, 2023, our natural gas distribution businesses in Florida have been consolidated for rate-making purposes and amounts above are now being presented on a consolidated basis consistent with the final rate order.

Environmental Commitments and Contingencies

5 unchanged sentences

and Winter Haven, Key West, Pensacola, Sanford and West Palm Beach, Florida.

As of September 30, 2022 and December 31, 2021, we had approximately $ 4.6 million and $ 5.2 million, respectively, in environmental liabilities related to the former MGP sites.

As of September 30, 2022 and December 31, 2021, we have cumulative regulatory assets of $ 0.9 million and $ 1.3 million, respectively, for future recovery of environmental costs for customers.

As of March 31, 2023 and December 31, 2022, we had approximately $ 3.5 million and $ 4.3 million, respectively, in environmental liabilities related to the former MGP sites.

As of March 31, 2023 and December 31, 2022, we have cumulative regulatory assets of $ 0.5 million and $ 0.8 million, respectively, for future recovery of environmental costs for customers.

Specific to FPU’s four MGP sites in Key West, Pensacola, Sanford and West Palm Beach, FPU has approval to recover, from insurance and through customer rates, up to $ 14.0 million of its environmental costs related to its MGP sites.

As of September 30, 2022 and December 31, 2021, we had recovered approximately $ 13.2 million and $ 12.9 million, respectively, leaving approximately $ 0.8 million and $ 1.1 million, respectively, in regulatory assets for future recovery of environmental costs from FPU’s customers.

The total $ 14.0 million was fully recovered as of March 31, 2023.

Environmental liabilities for our MGP sites are recorded on an undiscounted basis based on the estimate of future costs provided by independent consultants.

4 unchanged sentences

The remedial actions approved by the Florida Department of Environmental Protection have been implemented on the east parcel of our West Palm Beach Florida site.

Similar remedial actions have been initiated on the site's west parcel, and construction of active remedial systems are expected to be completed in 2023.

We expect the costs to clean-up the site to be between $3.3 million to $14.2 million, including any potential costs associated with future redevelopment of the properties.

Similar remedial actions have been initiated on the site's west parcel, and construction of active remedial systems are expected to be completed later in 2023.

Other Commitments and Contingencies

2 unchanged sentences

The agreements were effective as of April 1, 2023 and expire in March 2026.

FPU natural gas distribution operations and Eight Flags have separate asset management agreements with Emera Energy Services, Inc.

Our Florida natural gas distribution operations and Eight Flags have separate asset management agreements with Emera Energy Services, Inc.

to manage their natural gas transportation capacity.

These agreements are for a 10 -year term that commenced in November 2020 and expire in October 2030.

Chesapeake Utilities' natural gas division, CFG has firm transportation service contracts with FGT and Gulfstream.

Additionally, our Florida natural gas distribution operations have firm transportation service contracts with FGT and Gulfstream.

Pursuant to a capacity release program approved by the Florida PSC, all of the capacity under these agreements has been released to various third parties.

2 unchanged sentences

FPU’s electric supply contracts require FPU to maintain an acceptable standard of creditworthiness based on specific financial ratios.

FPU’s agreement with Florida Power & Light Company requires FPU to meet or exceed a debt service

coverage ratio of 1.25 times based on the results of the prior 12 months.

FPU’s agreement with Florida Power & Light Company requires FPU to meet or exceed a debt service coverage ratio of 1.25 times based on the results of the prior 12 months.

If FPU fails to meet this ratio, it must provide an irrevocable letter of credit or pay all amounts outstanding under the agreement within five business days.

3 unchanged sentences

Failure to comply with the ratios specified in the Gulf Power agreement could also result in FPU having to provide an irrevocable letter of credit.

As of September 30, 2022, FPU was in compliance with all of the requirements of its fuel supply contracts.

As of March 31, 2023, FPU was in compliance with all of the requirements of its fuel supply contracts.

Eight Flags provides electricity and steam generation services through its CHP plant located on Amelia Island, Florida.

4 unchanged sentences

The Board of Directors has authorized us to issue corporate guarantees securing obligations of our subsidiaries and to obtain letters of credit securing our subsidiaries' obligations.

The maximum authorized liability under such guarantees and letters of credit as of September 30, 2022 was $ 20.0 million.

The aggregate amount guaranteed related to our subsidiaries at September 30, 2022 was approximately $ 12.0 million with the guarantees expiring on various dates through August 9, 2023.

The maximum authorized liability under such guarantees and letters of credit as of March 31, 2023 was $ 20.0 million.

The aggregate amount guaranteed related to our subsidiaries at March 31, 2023 was approximately $ 14.2 million with the guarantees expiring on various dates through March 30, 2024.

In addition, the Board has authorized us to issue specific purpose corporate guarantees.

The amount of specific purpose guarantees outstanding at September 30, 2022 was $ 11.1 million, including a guarantee issued in July 2022 in the amount of $ 7.1 million associated with the Florida natural gas rate case.

As of September 30, 2022, we have issued letters of credit totaling approximately $ 5.3 million related to the electric transmission services for FPU's electric division, the firm transportation service agreement between TETLP and our Delaware and Maryland divisions, the capacity agreement between NEXUS and Aspire, and our current and previous primary insurance carriers.

These letters of credit have various expiration dates through September 30, 2023 and to date, none have been used.

The amount of specific purpose guarantees outstanding at March 31, 2023 was $ 4.0 million.

As of March 31, 2023, we have issued letters of credit totaling approximately $ 5.8 million related to the electric transmission services for FPU's electric division, the firm transportation service agreement between TETLP and our Delaware and Maryland divisions, the capacity agreement between NEXUS and Aspire, and our current and previous primary insurance carriers.

These letters of credit have various expiration dates through October 25, 2023 and to date, none have been used.

We do not anticipate that the counterparties will draw upon these letters of credit, and we expect that they will be renewed to the extent necessary in the future.

7 unchanged sentences

• Unregulated Energy.

Includes energy transmission, energy generation (the operations of our Eight Flags' CHP plant), propane operations, and mobile compressed natural gas delivery and virtual pipeline solutions subsidiary.

Includes energy transmission, energy generation (the operations of our Eight Flags' CHP plant), propane distribution operations, mobile compressed natural gas distribution and pipeline solutions operations, and project development activities related to our sustainable energy initiatives.

Also included in this segment are other unregulated energy services, such as energy-related merchandise sales and heating, ventilation and air conditioning, plumbing and electrical services.

2 unchanged sentences

The following table presents financial information about our reportable segments:

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

(in thousands)

8 unchanged sentences

Total intersegment revenues $ 7,351 $ 6,435

Operating Income/(Loss)

Operating Income

Regulated Energy $ 37,625 $ 34,681

8 unchanged sentences

(1) All significant intersegment revenues are billed at market rates and have been eliminated from consolidated operating revenues.

(in thousands) September 30, 2022 December 31, 2021

(in thousands) March 31, 2023 December 31, 2022

Identifiable Assets

5 unchanged sentences

Common Stock Issuances

In June 2020, we filed a shelf registration statement with the SEC to facilitate the issuance of our common stock from time to time.

In August 2020, we filed a prospectus supplement under the shelf registration statement for an ATM equity program under which we may issue and sell shares of our common stock up to an aggregate offering price of $ 75.0 million.

We maintain an effective shelf registration statement with the SEC for the issuance of shares under our DRIP.

We maintain an effective shelf registration statement with the SEC for the issuance of shares under our DRIP and ATM programs.

Depending on our capital needs and subject to market conditions, in addition to other possible debt and equity offerings, we may issue additional shares under the direct stock purchase component of the DRIP.

In 2021, we issued just over 0.1 million shares at an average price per share of $ 125.71 and received net proceeds of $ 15.2 million under the DRIP.

In the first nine months of 2022, we issued less than 0.1 million shares at an average price per share of $ 136.87 and received net proceeds of $ 4.4 million under the DRIP.

We used the net proceeds from our share issuances, after fees, for general corporate purposes, including, but not limited to, financing of capital expenditures, repayment of short-term debt, financing acquisitions, investing in subsidiaries, and general working capital purposes.

Accumulated Other Comprehensive Gain (Loss)

Under our current ATM equity program we may issue and sell shares of our common stock up to an aggregate offering price of $ 75.0 million through June 2023.

In 2022, we issued less than 0.1 million shares at an average price per share of $ 136.26 and received net proceeds of $ 4.5 million under the DRIP.

In the first three months of 2023, there were no issuances under the DRIP.

We use the net proceeds from our share issuances, after fees, for general corporate purposes, including, but not limited to, financing of capital expenditures, repayment of short-term debt, financing acquisitions, investing in subsidiaries, and general working capital purposes.

Accumulated Other Comprehensive Income (Loss)

Defined benefit pension and postretirement plan items, unrealized gains (losses) of our propane swap agreements designated as commodity contracts cash flow hedges, and the unrealized gains (losses) of our interest rate swap agreements designated as cash flow hedges are the components of our accumulated other comprehensive income (loss).

The following tables present the changes in the balance of accumulated other comprehensive gain (loss) as of September 30, 2022 and 2021.

The following tables present the changes in the balance of accumulated other comprehensive gain (loss) as of March 31, 2023 and 2022.

All amounts in the following tables are presented net of tax.

8 unchanged sentences

Net current-period other comprehensive income (loss) 10 ( 418 ) ( 196 ) ( 604 )

As of September 30, 2022 $ ( 3,215 ) $ 1,664 $ 153 $ ( 1,398 )

(in thousands)

As of March 31, 2023 $ ( 2,496 ) $ 674 $ ( 161 ) $ ( 1,983 )

As of December 31, 2021 $ ( 3,268 ) $ 4,571 $ — $ 1,303

2 unchanged sentences

Net prior-period other comprehensive income 18 529 — 547

As of September 30, 2021 $ ( 4,954 ) $ 7,403 $ ( 10 ) $ 2,439

The following table presents amounts reclassified out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021.

As of March 31, 2022 $ ( 3,250 ) $ 5,100 $ — $ 1,850

Deferred gains or losses for our commodity contracts and interest rate swap cash flow hedges are recognized in earnings upon settlement.

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

(in thousands)

Amortization of defined benefit pension and postretirement plan items:

Prior service credit (1)

$ 19 $ 19 $ 57 $ 57

( 43 ) ( 106 ) ( 129 ) ( 317 )

Total before income taxes ( 24 ) ( 87 ) ( 72 ) ( 260 )

Income tax benefit 6 23 19 68

Net of tax $ ( 18 ) $ ( 64 ) $ ( 53 ) $ ( 192 )

Gains on commodity contracts cash flow hedges:

Propane swap agreements (2)

$ 102 $ 681 $ 3,162 $ 4,183

Income tax expense ( 28 ) ( 188 ) ( 868 ) ( 1,156 )

Net of tax $ 74 $ 493 $ 2,294 $ 3,027

Gains on interest rate swap cash flow hedges:

Interest rate swap agreements $ — $ 24 $ — $ 50

Income tax expense — ( 6 ) — ( 13 )

Net of tax $ — $ 18 $ — $ 37

Total reclassifications for the period $ 56 $ 447 $ 2,241 $ 2,872

(1) These amounts are included in the computation of net periodic costs (benefits).

Prior service credit and net loss related to the defined benefit pension plan and postretirement plans are included in the computation of net periodic costs (benefits).

See Note 10, Employee Benefit Plans , for additional details.

(2) These amounts are included in the effects of gains and losses from derivative instruments.

Gains on commodity contracts classified as cash flow hedges related to our propane swaps are included in the effects of gains and losses from derivative instruments.

See Note 12, Derivative Instruments , for additional details.

Amortization of defined benefit pension and postretirement plan items are included in other expense, net gains and losses on propane swap agreements contracts are included in revenue and unregulated propane and natural gas, the realized gain or loss on interest rate swap agreements is recognized as a component of interest charges in the accompanying condensed consolidated statements of income.

realized gain or loss on interest rate swap agreements is recognized as a component of interest charges in the accompanying condensed consolidated statements of income.

The income tax benefit is included in income tax expense in the accompanying condensed consolidated statements of income.

Employee Benefit Plans

Net periodic benefit costs for our pension and post-retirement benefits plans for the three and nine months ended September 30, 2022 and 2021 are set forth in the following tables:

Pension Plan FPU

Pension Plan Chesapeake SERP Chesapeake

Postretirement

For the Three Months Ended September 30, 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021

(in thousands)

Interest cost $ — $ 34 $ 449 $ 429 $ 13 $ 12 $ 6 $ 6 $ 6 $ 6

Expected return on plan assets — ( 40 ) ( 857 ) ( 830 ) — — — — — —

Amortization of prior service credit — — — — — — ( 19 ) ( 19 ) — —

Amortization of net (gain) loss — 60 124 155 7 7 12 10 — ( 2 )

Total periodic cost (benefit) $ — $ 54 $ ( 284 ) $ ( 246 ) $ 20 $ 19 $ ( 1 ) $ ( 3 ) $ 6 $ 4

Pension Plan FPU

Pension Plan Chesapeake SERP Chesapeake

Postretirement

For the Nine Months Ended September 30, 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021

Net periodic benefit costs for the FPU Pension Plan for the three months ended March 31, 2023 and 2022 is set forth in the following table:

For the Three Months Ended March 31, 2023 2022

(in thousands)

1 unchanged sentence

Expected return on plan assets ( 668 ) ( 857 )

Amortization of prior service credit — — — — — — ( 57 ) ( 57 ) — —

Amortization of net (gain) loss 110 124

Total periodic cost (benefit) $ 75 $ ( 284 )

In 2019, we began executing a de-risking strategy for the Chesapeake Pension Plan.

In line with this strategy, we fully terminated the Chesapeake Pension Plan during the fourth quarter of 2021, and as of December 31, 2021, there were no remaining assets in the Chesapeake Pension Plan.

Accordingly, a portion of the pension settlement expense associated with the termination was allocated to our Regulated Energy operations and was recorded as regulatory assets, previously approved in all of the impacted jurisdictions.

The remaining portion of the pension settlement expense totaling $ 0.6 million was recorded in other expense in our consolidated statement of income in the fourth quarter 2021 which reflected the amount allocated to our Unregulated Energy operations or was deemed not recoverable through the regulatory process.

The components of our net periodic costs have been recorded or reclassified to other expense, net in the condensed consolidated statements of income.

Pursuant to their respective regulatory orders, FPU and Chesapeake Utilities continue to record, as a regulatory asset, a portion of their unrecognized postretirement benefit costs related to their regulated operations.

The portion of the unrecognized pension and postretirement benefit costs related to FPU’s unregulated operations and Chesapeake Utilities' operations is recorded to accumulated other comprehensive income.

The following tables present the amounts included in the regulatory asset and accumulated other comprehensive income that were recognized as components of net periodic benefit cost during the three and nine months ended September 30, 2022 and 2021:

For the Three Months Ended September 30, 2022 Chesapeake

Plan Chesapeake SERP Chesapeake

Postretirement

(in thousands)

Prior service credit $ — $ — $ — $ ( 19 ) $ — $ ( 19 )

Net loss — 124 7 12 — 143

Total recognized in net periodic benefit cost — 124 7 ( 7 ) — 124

Recognized from accumulated other comprehensive (income)/loss (1)

— 24 7 ( 7 ) — 24

Recognized from regulatory asset — 100 — — — 100

Total $ — $ 124 $ 7 $ ( 7 ) $ — $ 124

For the Three Months Ended September 30, 2021 Chesapeake

Plan Chesapeake SERP Chesapeake

Postretirement

(in thousands)

Prior service credit $ — $ — $ — $ ( 19 ) $ — $ ( 19 )

Net loss 60 155 7 10 ( 2 ) 230

Total recognized in net periodic benefit cost 60 155 7 ( 9 ) ( 2 ) 211

Recognized from accumulated other comprehensive (income)/loss (1)

60 29 7 ( 9 ) — 87

Recognized from regulatory asset — 126 — — ( 2 ) 124

Total $ 60 $ 155 $ 7 $ ( 9 ) $ ( 2 ) $ 211

For the Nine months ended September 30, 2022 Chesapeake

Plan Chesapeake SERP Chesapeake

Postretirement

(in thousands)

Prior service credit $ — $ — $ — $ ( 57 ) $ — $ ( 57 )

Net loss — 372 21 36 — 429

Total recognized in net periodic benefit cost — 372 21 ( 21 ) — 372

Recognized from accumulated other comprehensive (income)/loss (1)

— 72 21 ( 21 ) — 72

Recognized from regulatory asset — 300 — — — 300

Total $ — $ 372 $ 21 $ ( 21 ) $ — $ 372

For the Nine months ended September 30, 2021 Chesapeake

Plan Chesapeake SERP Chesapeake

Postretirement

The following table presents the amounts included in the regulatory asset and accumulated other comprehensive income that were recognized as components of the FPU Pension Plan's net periodic benefit cost during the three months ended March 31, 2023 and 2022:

For the Three Months Ended March 31, 2023 2022

(in thousands)

Prior service credit $ — $ — $ — $ ( 57 ) $ — $ ( 57 )

Net loss $ 110 $ 124

1 unchanged sentence

Recognized from accumulated other comprehensive (income) loss (1)

180 87 21 ( 27 ) ( 1 ) 260

Recognized from regulatory asset 89 100

1 unchanged sentence

(1) See Note 9 , Stockholders' Equity .

During the three and nine months ended September 30, 2022, we contributed $ 0.1 million to the FPU Pension Plan.

We expect to contribute approximately $ 0.3 million to the FPU Pension Plan during 2022, which represents the minimum annual contribution payments required.

Net periodic benefit cost for our other pension and post-retirement benefit plans were not material for the three months ended March 31, 2023 and 2022.

The components of our net periodic costs have been recorded or reclassified to other expense, net in the condensed consolidated statements of income.

During the three months ended March 31, 2023, there were no contributions to the FPU Pension Plan and we do not expect to contribute to the FPU Pension Plan during 2023.

The Chesapeake SERP, the Chesapeake Postretirement Plan and the FPU Medical Plan are unfunded and are expected to be paid out of our general funds.

Cash benefits paid under the Chesapeake SERP for the three and nine months ended September 30, 2022 were immaterial and $ 0.1 million, respectively.

We expect to pay total cash benefits of approximately $ 0.2 million under the Chesapeake SERP in 2022.

Cash benefits paid under the Chesapeake Postretirement Plan, primarily for medical claims for the three and nine months ended September 30, 2022 were $ 0.1 million and $ 0.2 million, respectively.

We estimate that approximately $ 0.2 million will be paid for such benefits under the Chesapeake Postretirement Plan in 2022.

Cash benefits paid under the FPU Medical Plan, primarily for medical claims for the three and nine months ended September 30, 2022, were immaterial.

We estimate that approximately $ 0.1 million will be paid for such benefits under the FPU Medical Plan in 2022.

The investment balances at September 30, 2022 and December 31, 2021, consisted of the following:

(in thousands) September 30,

2022 December 31,

Rabbi trust (associated with the Non-Qualified Deferred Compensation Plan) $ 9,874 $ 12,069

Investments in equity securities 21 26

Total $ 9,895 $ 12,095

We classify these investments as trading securities and report them at their fair value.

For the three months ended September 30, 2022 and 2021, we recorded a net unrealized loss of $ 0.4 million and a net unrealized loss of less than $ 0.1 million, respectively, in other income, net in the condensed consolidated statements of income related to these investments.

For the nine months ended September 30, 2022 and 2021, we recorded a net unrealized loss of approximately $ 2.4 million and a net unrealized gain of approximately $ 1.0 million, respectively, in other expense, net in the condensed consolidated statements of income related to these investments.

For the investment in the Rabbi Trust, we also have recorded an associated liability, which is included in other pension and benefit costs in the consolidated balance sheets and is adjusted each period for the gains and losses incurred by the investments in the Rabbi Trust.

Cash benefits paid under these other post retirement benefit plans for the three months ended March 31, 2023 were immaterial.

We expect to pay total cash benefits of approximately $ 0.2 million for the Chesapeake SERP, approximately $ 0.1 million for the Chesapeake Postretirement Plan, and approximately $ 0.1 million under the FPU Medical Plan in 2023.

Non-Qualified Deferred Compensation Plan

Members of our Board of Directors and officers of the Company are eligible to participate in the Non-Qualified Deferred Compensation Plan.

Directors can elect to defer any portion of their cash or stock compensation and officers

can defer up to 80 percent of their base compensation, cash bonuses or any amount of their stock bonuses (net of required withholdings).

Officers may receive a matching contribution on their cash compensation deferrals up to 6 percent of their compensation, provided it does not duplicate a match they receive in the Retirement Savings Plan.

All obligations arising under the Non-Qualified Deferred Compensation Plan are payable from our general assets, although we have established a Rabbi Trust to informally fund the plan.

Deferrals of cash compensation may be invested by the participants in various mutual funds (the same options that are available in the Retirement Savings Plan).

The participants are credited with gains or losses on those investments.

Assets held in the Rabbi Trust, recorded as Investments on the consolidated balance sheet, had a fair value of $ 10.8 million at March 31, 2023 and $ 10.6 million at December 31, 2022.

The assets of the Rabbi Trust are at all times subject to the claims of our general creditors.

Share-Based Compensation

Our non-employee directors and key employees are granted share-based awards through our SICP.

Our non-employee directors and key employees have been granted share-based awards through our SICP.

We record these share-based awards as compensation costs over the respective service period for which services are received in exchange for an award of equity or equity-based compensation.

The compensation cost is based primarily on the fair value of the shares awarded, using the estimated fair value of each share on the date it was granted, and the number of shares to be issued at the end of the service period.

The table below presents the amounts included in net income related to share-based compensation expense for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

The table below presents the amounts included in net income related to share-based compensation expense for the three months ended March 31, 2023 and 2022:

Three Months Ended

(in thousands)

Awards to non-employee directors $ 252 $ 201 $ 706 $ 581

Awards to key employees $ 2,156 $ 1,979

Awards to non-employee directors 252 234

Total compensation expense 2,408 2,213

1 unchanged sentence

Share-based compensation amounts included in net income $ 1,786 $ 1,642

Non-employee Directors

Shares granted to non-employee directors are issued in advance of the directors’ service periods and are fully vested as of the grant date.

We record a deferred expense equal to the fair value of the shares issued and amortize the expense equally over a service period of one year.

In May 2022, after the most recent election of directors, each of our non-employee directors received an annual retainer of 652 shares of common stock under the SICP for service as a director through the 2023 Annual Meeting of Stockholders;

accordingly, 6,520 shares, with a weighted average fair value of $ 130.36 per share, were issued and vested in 2022.

In July, 2022, we announced the appointment of two new non-employee directors to our current Board.

These newly appointed directors were each granted a pro-rated share-based award of 526 shares through the SICP in accordance with the beginning of their service period.

The associated expense is being recognized in the same manner utilized for our pre-existing non-employee directors.

At September 30, 2022, there was approximately $ 0.6 million of unrecognized compensation expense related to shares granted to non-employee directors.

This expense will be recognized over the remaining service period ending in May 2023.

Key Employees

The table below presents the summary of the stock activity for awards to key employees for the nine months ended September 30, 2022:

Officers and Key Employees

Our Compensation Committee is authorized to grant our key employees the right to receive awards of shares of our common stock, contingent upon the achievement of established performance goals and subject to SEC transfer restrictions once awarded.

Our President and CEO has the right to issue awards of shares of our common stock, to other officers of the Company, contingent upon various performance goals and subject to SEC transfer restrictions.

We currently have several outstanding multi-year performance plans, which are based upon the successful achievement of long-term goals, growth and financial results and comprise both market-based and performance-based conditions and targets.

The fair value per share, tied to a performance-based condition or target, is equal to the market price per share on the grant date.

For the market-based conditions, we used the Monte Carlo valuation to estimate the fair value of each share granted.

The table below presents the summary of the stock activity for awards to key employees for the three months ended March 31, 2023:

Number of Shares Weighted Average

3 unchanged sentences

Expired ( 2,053 ) $ 94.64

Outstanding—September 30, 2022 204,563 $ 103.01

During the nine months ended September 30, 2022, we granted awards of 67,458 shares of common stock to key employees under the SICP, including awards granted in February 2022 and to key employees appointed in officer positions.

Outstanding—March 31, 2023 214,345 $ 117.23

During the three months ended March 31, 2023, we granted awards of 80,551 shares of common stock to key employees under the SICP, including awards granted in February 2023 to key employees appointed in officer positions.

The shares granted are multi-year awards that will vest no later than the three-year service period ending December 31, 2025.

2 unchanged sentences

For the market-based conditions, we used the Monte Carlo valuation to estimate the fair value of each market-based award granted.

In March 2022, upon the election by certain of our executive officers, we withheld shares with a value at least equivalent to each such executive officer’s minimum statutory obligation for applicable income and other employment taxes related to shares that vested and were paid in February 2022 for the performance period ended December 31, 2021, and paid the balance of such awarded shares to each such executive officer net cash remitted to the appropriate taxing authorities.

In March 2023, upon the election by certain of our executive officers, we withheld shares with a value at least equivalent to each such executive officer’s minimum statutory obligation for applicable income and other employment taxes related to shares that vested and were paid in March 2023 for the performance period ended December 31, 2022.

We paid the balance of such awarded shares to each such executive officer and remitted cash equivalent to the withheld shares to the appropriate taxing authorities.

We withheld 19,859 shares, based on the value of the shares on their award date.

Total combined payments for the employees’ tax obligations to the taxing authorities were approximately $ 2.5 million.

At September 30, 2022, the aggregate intrinsic value of the SICP awards granted to key employees was approximately $ 23.6 million.

At September 30, 2022, there was approximately $ 7.7 million of unrecognized compensation cost related to these awards, which will be recognized through 2024.

Stock Options

There were no stock options outstanding or issued during the nine months ended September 30, 2022 and 2021.

At March 31, 2023, the aggregate intrinsic value of the SICP awards granted to key employees was approximately $ 27.4 million.

At March 31, 2023, there was approximately $ 11.1 million of unrecognized compensation cost related to these awards, which will be recognized through 2025.

Non-employee Directors

Shares granted to non-employee directors are issued in advance of the directors’ service periods and are fully vested as of the grant date.

We record a deferred expense equal to the fair value of the shares issued and amortize the expense equally over a service period of one year or less.

Our directors receive an annual retainer of shares of common stock under the SICP for services rendered through the subsequent Annual Meeting of Shareholders.

Accordingly, our directors that served on the Board as of May 2022 each received 652 shares of common stock, respectively, with a weighted average fair value of $ 130.36 per share.

In July 2022, we announced the appointment of two new non-employee directors to our Board.

These newly appointed directors were each granted a prorated share-based award of 526 shares through the SICP in accordance with the beginning of their service period.

The associated expense is being recognized consistent with the methodology described above.

At March 31, 2023, there was approximately $ 0.1 million of unrecognized compensation expense related to shares granted to non-employee directors.

This expense will be recognized over the remaining service period ending in May 2023.

Derivative Instruments

5 unchanged sentences

Occasionally, we may enter into interest rate swap agreements to mitigate risk associated with changes in short-term borrowing rates.

As of September 30, 2022, our natural gas and electric distribution operations did not have any outstanding derivative contracts.

As of March 31, 2023, our natural gas and electric distribution operations did not have any outstanding derivative contracts.

Volume of Derivative Activity

As of September 30, 2022, the volume of our commodity derivative contracts were as follows:

As of March 31, 2023, the volume of our commodity derivative contracts were as follows:

Business unit Commodity Contract Type Quantity hedged (in millions) Designation Longest Expiration date of hedge

Sharp Propane (gallons) Purchases 23.5 Cash flows hedges August 2025

Sharp Propane (gallons) Sales 3.8 Cash flows hedges March 2023

Sharp Propane (gallons) Purchases 13.5 Cash flow hedges August 2025

Sharp Propane (gallons) Sales 3.2 Cash flow hedges December 2023

Sharp entered into futures and swap agreements to mitigate the risk of fluctuations in wholesale propane index prices associated with the propane volumes that are expected to be purchased and/or sold during the heating season.

Under the futures and swap agreements, Sharp will receive the difference between (i) the index prices (Mont Belvieu prices in September 2022 through August 2025) and (ii) the per gallon propane swap prices, to the extent the index prices exceed the contracted prices.

Under the futures and swap agreements, Sharp will receive the difference between (i) the index prices (Mont Belvieu prices in March 2023 through August 2025) and (ii) the per gallon propane swap prices, to the extent the index prices exceed the contracted prices.

If the index prices are lower than the contract prices, Sharp will pay the difference.

We designated and accounted for the propane swaps as cash flows hedges.

We designated and accounted for the propane swaps as cash flow hedges.

The change in the fair value of the swap agreements is recorded as unrealized gain (loss) in other comprehensive income (loss) and later recognized in the statement of income in the same period and in the same line item as the hedged transaction.

We expect to reclassify approximately $ 1.2 million from accumulated other comprehensive income to earnings during the next 12 -month period ended September 30, 2023.

We expect to reclassify approximately $ 1.0 million from accumulated other comprehensive income (loss) related to our commodity cash flow hedges to earnings during the next 12 -month period ended March 31, 2024.

Interest Rate Swap Activities

We manage interest rate risk by entering into derivative contracts to hedge the variability in cash flows attributable to changes in the short-term borrowing rates.

In the fourth quarter of 2020, we entered into two $ 30.0 million interest rate swaps with a total notional amount of $ 60.0 million through September and December 2021 with pricing of 0.205 and 0.20 percent, respectively, for the period associated with our outstanding borrowing under the Revolver.

In February 2021, we entered into an additional interest rate swap with a notional amount of $ 40.0 million through December 2021 with pricing of 0.17 percent.

In September 2022, we entered into an interest rate swap with a notional amount of $ 50.0 million through September 2025, with pricing of 3.98 percent.

2 unchanged sentences

Our prior interest rate swaps were cash settled monthly as the counter-party paid us the 30-day LIBOR rate less the fixed rate.

Our current interest rate swap is cash settled monthly as the counter-party pays us the 30-day SOFR rate less the fixed rate.

We designate and account for interest rate swaps as cash flows hedges.

Accordingly, unrealized gains and losses associated with the interest rate swaps are recorded as a component of accumulated other comprehensive income (loss).

When the interest rate swaps settle, the realized gain or loss is recorded in the income statement and is recognized as a component of interest charges.

Our interest rate swap is cash settled monthly as the counter-party pays us the 30-day SOFR rate less the fixed rate.

We designate and account for interest rate swaps as cash flow hedges.

Accordingly, unrealized gains and losses associated with the interest rate swap are recorded as a component of accumulated other comprehensive income (loss).

When the interest rate swap settles, the realized gain or loss is recorded in the income statement and is recognized as a component of interest charges.

Broker Margin

1 unchanged sentence

Margin requirements consist of initial margin that is posted upon the initiation of a position, maintenance margin that is usually expressed as a percent of initial margin, and variation margin that fluctuates based on the daily mark-to-market relative to maintenance margin requirements.

We currently maintain a broker margin account for Sharp as follows:

(in thousands) Balance Sheet Location September 30, 2022 December 31, 2021

Sharp Other Accrued Liabilities $ 1,493 $ 4,081

We currently maintain a broker margin account for Sharp which was classified within our Other Current Assets on the consolidated balance sheet with a balance of $ 0.1 million as of March 31, 2023.

At December 31, 2022, $ 0.1 million was classified in Other Current Liabilities on the consolidated balance sheet.

Financial Statements Presentation

1 unchanged sentence

We did not have any derivative contracts with a credit-risk-related contingency.

Fair values of the derivative contracts recorded in the consolidated balance sheets as of September 30, 2022 and December 31, 2021, are as follows:

Fair values of the derivative contracts recorded in the consolidated balance sheets as of March 31, 2023 and December 31, 2022, are as follows:

Derivative Assets

Fair Value As Of

(in thousands) Balance Sheet Location September 30, 2022 December 31, 2021

Derivatives not designated as hedging instruments

Propane swap agreements Derivative assets, at fair value $ — $ 16

(in thousands) Balance Sheet Location March 31, 2023 December 31, 2022

Derivatives designated as cash flow hedges

2 unchanged sentences

Total Derivative Assets (1)

$ 2,146 $ 3,769

(1) Derivative assets, at fair value include $ 1.2 million and $ 2.8 million in current assets in the condensed consolidated balance sheet at March 31, 2023 and December 31, 2022, respectively, with the remainder of the balance classified as long-term.

Derivative Liabilities

Fair Value As Of

(in thousands) Balance Sheet Location September 30, 2022 December 31, 2021

(in thousands) Balance Sheet Location March 31, 2023 December 31, 2022

Derivatives designated as cash flow hedges

2 unchanged sentences

Total Derivative Liabilities (1)

$ 1,434 $ 2,215

(1) Derivative liabilities, at fair value include $ 0.8 million and $ 0.6 million in current liabilities in the condensed consolidated balance sheet at March 31, 2023 and December 31, 2022, respectively, with the remainder of the balance classified as long-term.

The effects of gains and losses from derivative instruments on the condensed consolidated financial statements are as follows:

Amount of Gain (Loss) on Derivatives

Location of Gain For the Three Months Ended September 30, For the Nine Months Ended September 30,

Location of Gain For the Three Months Ended March 31,

(in thousands) (Loss) on Derivatives 2023 2022

1 unchanged sentence

Propane swap agreements Unregulated propane and natural gas costs $ — $ 56

Derivatives designated as fair value hedges

Propane put options Unregulated propane and natural gas costs — — — ( 24 )

Derivatives designated as cash flow hedges

16 unchanged sentences

Financial Assets and Liabilities Measured at Fair Value

The following tables summarize our financial assets and liabilities that are measured at fair value on a recurring basis and the fair value measurements, by level, within the fair value hierarchy as of September 30, 2022 and December 31, 2021:

Fair Value Measurements Using:

As of September 30, 2022 Fair Value Quoted Prices in

As of March 31, 2023 Fair Value Quoted Prices in

Active Markets

22 unchanged sentences

Derivative liabilities $ 2,215 $ — $ 2,215 $ —

The following table sets forth the summary of the changes in the fair value of Level 3 investments for the nine months ended September 30, 2022 and 2021:

Nine months ended September 30,

The following table sets forth the summary of the changes in the fair value of Level 3 investments for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(in thousands)

6 unchanged sentences

Investment income from the Level 3 investments is reflected in other income, (net) in the condensed consolidated statements of income.

At September 30, 2022, there were no non-financial assets or liabilities required to be reported at fair value.

At March 31, 2023, there were no non-financial assets or liabilities required to be reported at fair value.

We review our non-financial assets for impairment at least on an annual basis, as required.

4 unchanged sentences

The fair value of short-term debt approximates the carrying value due to its near-term maturities and because interest rates approximate current market rates (Level 2 measurement).

At September 30, 2022, long-term debt, which includes current maturities but excludes debt issuance costs, had a carrying value of approximately $ 606.3 million, compared to the estimated fair value of $ 504.9 million.

At March 31, 2023, long-term debt, which includes current maturities but excludes debt issuance costs, had a carrying value of approximately $ 678.8 million, compared to the estimated fair value of $ 597.5 million.

At December 31, 2022, long-term debt, which includes the current maturities but excludes debt issuance costs, had a carrying value of approximately $ 600.8 million, compared to a fair value of approximately $ 505.0 million.

3 unchanged sentences

Our outstanding long-term debt is shown below:

September 30, December 31,

March 31, December 31,

(in thousands) 2023 2022

14 unchanged sentences

2.95% notes Due March 15, 2042 50,000 50,000

5.43% notes Due March 14, 2038 80,000 —

Equipment security note

8 unchanged sentences

These Senior Notes have similar covenants and default provisions as our other Senior Notes, and have an annual principal payment beginning in the eleventh year after the issuance.

On September 28, 2022, we agreed to issue and Prudential agreed to purchase 5.43 percent Senior Notes due March 14, 2038 in the aggregate principal amount of $ 80.0 million.

We expect to issue the Notes on or before March 14, 2023.

We anticipate using the proceeds received from the issuance of the Notes to reduce short-term borrowings under our revolving credit facility and to fund capital expenditures.

Equipment Security Note

On September 24, 2021, we entered into an Equipment Financing Agreement with Banc of America Leasing & Capital, LLC to issue $ 9.6 million in sustainable financing to finance the purchase of equipment by our subsidiary, Marlin Gas Services.

The equipment security note bears a 2.46 percent interest rate and has a term of ten years.

Under the terms of the agreement, we granted a security interest in the equipment to the lender, to serve as collateral.

On March 14, 2023 we issued 5.43 percent Senior Notes due March 14, 2038 in the aggregate principal amount of $ 80.0 million and used the proceeds received from the issuances of the Senior Notes to reduce short-term borrowings under our Revolver credit facility and to fund capital expenditures.

These Senior Notes have similar covenants and default provisions as our other Senior Notes, and have an annual principal payment beginning in the sixth year after the issuance.

Shelf Agreements

We have entered into Shelf Agreements with Prudential and MetLife, whom are under no obligation to purchase any unsecured debt.

The following table summarizes our Shelf Agreements at September 30, 2022:

In February 2023, we amended our Shelf Agreements with Prudential and MetLife.

The amended agreements expand the total borrowing capacity and extend the term of the agreements for an additional three years from the effective dates.

The following table summarizes the current available capacity under our Shelf Agreements at March 31, 2023:

(in thousands) Total Borrowing Capacity Less:

1 unchanged sentence

Unfunded Commitments Remaining Borrowing Capacity

Shelf Agreement

Shelf Agreements (1)

Prudential Shelf Agreement $ 405,000 $ ( 300,000 ) $ — $ 105,000

$ 370,000 $ ( 220,000 ) $ ( 80,000 ) $ 70,000

MetLife Shelf Agreement 200,000 ( 50,000 ) — 150,000

150,000 ( 50,000 ) — 100,000

Total Shelf Agreements as of September 30, 2022

Total Shelf Agreements as of March 31, 2023

$ 605,000 $ ( 350,000 ) $ — $ 255,000

(1) The Prudential and MetLife Shelf Agreements expire in April 2023 and May 2023, respectively.

(2) Unfunded commitments of $ 80.0 million reflects Senior Notes expected to be issued on or before March 14, 2023.

The Uncollateralized Senior Notes, Shelf Agreements or Shelf Notes set forth certain business covenants to which we are subject when any note is outstanding, including covenants that limit or restrict our ability, and the ability of our subsidiaries, to incur indebtedness, or place or permit liens and encumbrances on any of our property or the property of our subsidiaries.

(1) The Prudential and MetLife Shelf Agreements both expire in February 2026.

The Uncollateralized Senior Notes set forth certain business covenants to which we are subject when any note is outstanding, including covenants that limit or restrict our ability, and the ability of our subsidiaries, to incur indebtedness, or place or permit liens and encumbrances on any of our property or the property of our subsidiaries.

Short-Term Borrowings

We are authorized by our Board of Directors to borrow up to $ 400.0 million of short-term debt, as required.

At September 30, 2022 and December 31, 2021, we had $ 167.3 million and $ 221.6 million, respectively, of short-term borrowings outstanding at a weighted average interest rate of 4.13 percent and 0.83 percent, respectively.

Included in the September 30, 2022 balance, is $ 50.0 million in short-term debt for which we have entered into an interest rate swap agreement.

In August 2021, we amended and restated our Revolver into a multi-tranche facility totaling $ 400.0 million with multiple participating lenders.

The two tranches of the Revolver consist of a $ 200.0 million 364-day short-term debt tranche and a $ 200.0 million five-year tranche, both of which have three (3) one-year extension options, which can be authorized by our Chief Financial Officer.

We are eligible to establish the repayment term for individual borrowings under the five year tranche of the Revolver and to the extent that an individual loan under the Revolver exceeded 12 months, the outstanding balance would be classified as a component of long-term debt.

In August 2022, we amended both tranches of the Revolver, which now bear interest using SOFR as the benchmark interest rate, plus a 10-basis point SOFR adjustment, in lieu of LIBOR which is being retired by financial institutions.

In addition, the 364-day tranche was extended for the upcoming year, expiring in August 2023.

Furthermore, the previous covenant capping the aggregate investments at $ 150.0 million where we maintain a less than 50 percent ownership interest has been eliminated and the 364 day tranche of the facility now offers a reduced interest margin similar to the five-year tranche for amounts borrowed in connection to certain sustainable investments.

All other terms and conditions remained unchanged.

At March 31, 2023 and December 31, 2022, we had $ 94.1 million and $ 202.2 million, respectively, of short-term borrowings outstanding at a weighted average interest rate of 5.17 percent and 5.04 percent, respectively.

In August 2022, we amended both tranches of our Revolver, which now bear interest using SOFR as the benchmark interest rate, plus a 10-basis point SOFR adjustment, in lieu of LIBOR which is being retired by financial institutions.

In addition, the 364-day tranche was extended for the current year, expiring in August 2023.

As part of these amendments, the parties agreed to eliminate the previous covenant capping the aggregate investments limit at $ 150.0 million where we maintain an ownership interest less than 50 percent.

Additionally the 364-day tranche of the facility now offers a reduced interest margin similar to the five-year tranche for amounts borrowed in connection with new sustainable investments.

All other terms and conditions remain unchanged.

Borrowings outstanding under the sustainable investment sublimit of the 364-day tranche amounted to $ 9.4 million at March 31, 2023.

The availability of funds under the Revolver is subject to conditions specified in the credit agreement, all of which we currently satisfy.

1 unchanged sentence

We are required by the financial covenants in the Revolver to maintain, at the end of each fiscal year, a funded indebtedness ratio of no greater than 65 percent.

As of September 30, 2022, we are in compliance with this covenant.

As of March 31, 2023, we are in compliance with this covenant.

The 364-day tranche of the Revolver expires in August 2023 and the five-year tranche expires in August 2026, both of which are available to fund our short-term cash needs to meet seasonal working capital requirements and to temporarily fund portions of our capital expenditures.

Borrowings under both tranches of the Revolver are subject to a pricing grid, including the commitment fee and the interest rate charged based upon our total indebtedness to total capitalization ratio for the prior quarter.

As of September 30, 2022, the pricing under the 364-day tranche of the Revolver does not include an unused commitment fee and maintains an interest rate of 70 basis points over SOFR plus a 10 basis point SOFR adjustment.

As of September 30, 2022, the pricing under the five-year tranche of the Revolver included an unused commitment fee of 9 basis points and an interest rate of 95 basis points over SOFR plus a 10 basis point SOFR adjustment.

The total available credit under the Revolver at September 30, 2022 was $ 227.4 million.

As of September 30, 2022, we had issued $ 5.3 million in letters of credit to various counterparties under the Revolver.

These letters of credit are not

included in the outstanding short-term borrowings and we do not anticipate that they will be drawn upon by the counterparties.

As of March 31, 2023, the pricing under the 364-day tranche of the Revolver included an unused commitment fee of 9 basis points and maintains an interest rate of 70 basis points over SOFR plus a 10 basis point SOFR adjustment.

As of March 31, 2023, the pricing under the five-year tranche of the Revolver included an unused commitment fee of 9 basis points and an interest rate of 95 basis points over SOFR plus a 10 basis point SOFR adjustment.

Our total available credit under the Revolver at March 31, 2023 was $ 300.1 million.

As of March 31, 2023, we had issued $ 5.8 million in letters of credit to various counterparties under the Revolver.

These letters of credit are not included in the outstanding short-term borrowings and we do not anticipate that they will be drawn upon by the counterparties.

The letters of credit reduce the available borrowings under the Revolver.

In the fourth quarter of 2020, we entered into two $ 30.0 million interest rate swaps with a notional amount of $ 60.0 million through September and December 2021 at a price of 0.205 and 0.20 over LIBOR, respectively.

In February 2021, we entered into an additional interest rate swap with a notional amount of $ 40.0 million through December 2021 with a price of 0.17 over LIBOR.

In the third quarter of 2022, we entered into an interest rate swap with a notional amount of $ 50.0 million through September 30, 2025 at a price of 3.98 percent.

For additional information on interest rate swaps related to our short-term borrowings, see Note 12, Derivative Instruments .

We have entered into lease arrangements for office space, land, equipment, pipeline facilities and warehouses.

10 unchanged sentences

The exercise of lease renewal options is at our sole discretion.

The amounts disclosed in our consolidated balance sheet at September 30, 2022, pertaining to the right-of-use assets and lease liabilities, are measured based on our current expectations of exercising our available renewal options.

The amounts disclosed in our consolidated balance sheet at March 31, 2023, pertaining to the right-of-use assets and lease liabilities, are measured based on our current expectations of exercising our available renewal options.

Our existing leases are not subject to any restrictions or covenants that would preclude our ability to pay dividends, obtain financing or enter into additional leases.

As of September 30, 2022, we have not entered into any leases, which have not yet commenced, that would entitle us to significant rights or create additional obligations.

As of March 31, 2023, we have not entered into any leases, which have not yet commenced, that would entitle us to significant rights or create additional obligations.

The following table presents information related to our total lease cost included in our consolidated statements of income:

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

( in thousands) Classification 2023 2022

2 unchanged sentences

(1) Includes short-term leases and variable lease costs, which are immaterial .

The following table presents the balance and classifications of our right of use assets and lease liabilities included in our condensed consolidated balance sheet at September 30, 2022 and December 31, 2021:

(in thousands) Balance sheet classification September 30, 2022 December 31, 2021

The following table presents the balance and classifications of our right of use assets and lease liabilities included in our condensed consolidated balance sheet at March 31, 2023 and December 31, 2022:

(in thousands) Balance sheet classification March 31, 2023 December 31, 2022

Operating lease assets Operating lease right-of-use assets $ 14,272 $ 14,421

2 unchanged sentences

Total lease liabilities $ 14,672 $ 14,944

The following table presents our weighted-average remaining lease terms and weighted-average discount rates for our operating and financing leases at September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

The following table presents our weighted-average remaining lease terms and weighted-average discount rates for our operating leases at March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

Weighted-average remaining lease term ( in years )

2 unchanged sentences

Operating leases 3.5 % 3.4 %

The following table presents additional information related to cash paid for amounts included in the measurement of lease liabilities included in our condensed consolidated statements of cash flows as of September 30, 2022 and 2021:

Nine Months Ended

September 30,

Three Months Ended

(in thousands) 2023 2022

Operating cash flows from operating leases $ 722 $ 609

The following table presents the future undiscounted maturities of our operating and financing leases at September 30, 2022 and for each of the next five years and thereafter:

The following table presents the future undiscounted maturities of our operating and financing leases at March 31, 2023 and for each of the next five years and thereafter:

(in thousands) Operating

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements