Chesapeake Utilities' Strong 2016 Performance Marks Tenth Straight Year Of Record Earnings

• $7.2 million generated from natural gas transmission expansions completed in 2014 and 2015, as well as interim services provided pending completion of new facilities, which are more fully discussed in the "Major Projects and Initiatives" section later in this press release;
• $4.0 million generated by additional GRIP investments in the Florida natural gas distribution operations;
• $2.7 million from customer growth in natural gas distribution and transmission services over and above the growth attributable to recent service expansions;
• $1.5 million generated from the partial year implementation of new rates for the Company's Delaware natural gas distribution division;
• $1.4 million from new natural gas transmission and distribution services provided to Eight Flags Energy, LLC's ("Eight Flags") CHP plant; and
• $736,000 from higher margins generated by Sandpiper Energy, Inc. ("Sandpiper") associated with the continued conversion of its distribution system from propane to natural gas.

The significant drivers of the $8.1 million increase in operating expenses included:

• $3.6 million in higher staffing and associated costs for additional personnel to support growth;
• $2.6 million in higher depreciation, asset removal and property tax costs associated with recent capital investments to support growth and system integrity; and
• $1.4 million due to the absence of a $1.5 million gain from a customer billing system settlement in 2015.

Unregulated Energy
Operating income for the Unregulated Energy segment decreased by $2.5 million in 2016 compared to 2015. This decrease resulted from lower gross margin due primarily to warmer than normal weather during the first quarter of 2016, as well as lower propane retail margins per gallon throughout 2016 as margins returned to more normal levels. Despite these impacts, gross margin for the Unregulated Energy segment increased $4.6 million in 2016, compared to 2015, driven by growth from Aspire Energy, the Eight Flags' CHP plant, and the Company's natural gas marketing subsidiary, Peninsula Energy Services Company, Inc. ("PESCO"). The higher gross margin was more than offset by increased operating expenses of $7.1 million, which reflects the significant growth the Company experienced in 2016.

Gross margin increased $4.6 million, largely as a result of the following:

• $4.2 million from Aspire Energy, due to the fact that 2015 reflected only nine months of margin for Aspire Energy, which became a wholly-owned subsidiary of Chesapeake Utilities on April 1, 2015;
• $1.7 million from Aspire Energy as a result of pricing amendments to long-term gas sales agreements, additional management fees and higher volumes of natural gas delivered to or on behalf of certain of its customers;
• $3.6 million from Eight Flags' CHP plant, which commenced operations in June 2016; and
• $1.0 million from PESCO due to an increase in the number of contracts and customers served.

The above increases were offset by the following:

• $2.8 million of lower gross margin for the Company's propane distribution operations as propane retail margins per gallon returned to more normal levels;
• $1.4 million of lower gross margin due to lower customer consumption of propane mainly as a result of warmer than normal temperatures on the Delmarva Peninsula, primarily during the first quarter of 2016 compared to colder than normal temperatures during the first quarter of 2015; and
• $847,000 of lower gross margin from Xeron.

The significant components of the $7.1 million increase in operating expenses included:

• $2.8 million incurred by Aspire Energy, $1.6 million of which occurred in the first quarter of 2016, compared to zero in the first quarter of 2015 prior to the closing of the acquisition of Aspire Energy's operations;
• $2.4 million in operating expenses incurred by the Eight Flags' CHP plant, which commenced operations in June 2016;
• $817,000 in higher staffing and associated costs for additional personnel to support growth; and
• $683,000 in higher outside services costs primarily associated with growth and ongoing compliance activities.

Operating Results for the Quarters Ended December 31, 2016 and 2015

The Company's operating income for the fourth quarter of 2016 was $21.8 million, an increase of $5.6 million, compared to the same quarter in 2015. The increased operating income was due to growth in both the Regulated Energy and Unregulated Energy segments.

Regulated Energy Segment
Operating income for the Regulated Energy segment increased by $3.8 million to $17.2 million in the fourth quarter of 2016, compared to the same quarter in 2015. The increased operating income resulted from a $5.6 million increase in gross margin, partially offset by a $1.8 million increase in operating expenses. The significant components of the gross margin increase included:

• $1.7 million generated from natural gas transmission expansions completed in 2014 and 2015, as well as interim services pending completion of new facilities, which are discussed in the "Major Projects and Initiatives" section later in this press release;
• $1.2 million as a result of colder weather experienced during the fourth quarter of 2016;
• $975,000 generated by additional GRIP investments in the Florida natural gas distribution operations;
• $794,000 from customer growth in natural gas distribution services, unrelated to a recent service expansion offset by $304,000 in decreased margin from interruptible service to customers; and
• $477,000 from new natural gas transmission and distribution services provided to Eight Flags' CHP plant.

The significant components of the $1.8 million increase in operating expenses included:

• $1.2 million in higher staffing and associated costs for additional personnel to support growth; and
• $1.1 million in higher depreciation expense, amortization, asset removal and property tax costs associated with capital investments to support growth and maintain system integrity.

Unregulated Energy Segment
Operating income for the Unregulated Energy segment for the fourth quarter of 2016 was $4.6 million, an increase of $1.9 million compared to operating income for the same quarter in 2015. The increased operating income resulted from a $5.2 million increase in gross margin, offset by a $3.3 million increase in operating expenses. The significant components of the gross margin increase included:

• $2.4 million from higher propane gas sales by the Company's propane distribution operation primarily on the Delmarva Peninsula in response to colder weather quarter-over-quarter;
• $1.9 million from Eight Flags' CHP plant; and
• $1.4 million from Aspire Energy as a result of pricing amendments to long-term gas sales agreements, additional management fees and higher volumes of natural gas delivered to or on behalf of certain of its customers; which increases were offset by
• $427,000 of lower gross margin from Xeron.

The significant components of the $3.3 million increase in operating expenses included:

• $1.3 million in operating expenses incurred by Eight Flags' CHP plant;
• $738,000 in higher staffing and associated costs for additional personnel to support growth;
• $344,000 in operating expenses, primarily higher staffing and associated costs as well as depreciation expense, incurred by Aspire Energy; and
• $289,000 in higher outside service expenses and facilities maintenance expenses.

Matters discussed in this release may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements. Please refer to the Safe Harbor for Forward-Looking Statements in the Company's 2016 Annual Report on Form 10-K for further information on the risks and uncertainties related to the Company's forward-looking statements.

The discussions of the results use the term "gross margin," a non-Generally Accepted Accounting Principles ("GAAP") financial measure, which management uses to evaluate the performance of the Company's business segments. For an explanation of the calculation of "gross margin," see the footnote to the Financial Summary.

Unless otherwise noted, earnings per share information is presented on a diluted basis.

Conference Call

Chesapeake Utilities Corporation will host a conference call on March 1, 2017 at 10:30 a.m. Eastern Time to discuss the Company's financial results for the year and quarter ended December 31, 2016. To participate in this call, dial 855.801.6270 and reference Chesapeake Utilities' 2016 Financial Results Conference Call. To access the replay recording of this call, please visit the Company's website at http://investor.chpk.com/results.cfm or download the replay on your mobile device by accessing the Audiocast section of the Company's IR App.

About Chesapeake Utilities Corporation

Chesapeake Utilities is a diversified energy company engaged in natural gas distribution, transmission, gathering and processing, and marketing; electricity generation and distribution; propane gas distribution; propane and crude oil wholesale marketing; and other businesses. Information about Chesapeake Utilities and its family of businesses is available at http://www.chpk.com or through its IR App.

Please note that Chesapeake Utilities Corporation is not affiliated with Chesapeake Energy, an oil and natural gas exploration company headquartered in Oklahoma City, Oklahoma.

For more information, contact:

Beth W. Cooper
Senior Vice President & Chief Financial Officer
302.734.6799

Financial Summary (in thousands, except per-share data)
	Year Ended						Fourth Quarter
For the Periods Ended December 31,	2016			2015			2016			2015
Gross Margin (1)
Regulated Energy	$	196,080		$	179,088		$	50,633		$	45,064
Unregulated Energy	64,962			60,317			19,582			14,388
Other businesses and eliminations	(225)			(203)			(58)			(46)
Total Gross Margin	$	260,817		$	239,202		$	70,157		$	59,406
Operating Income
Regulated Energy	$	69,851		$	60,985		$	17,191		$	13,369
Unregulated Energy	13,844			16,355			4,577			2,689
Other businesses and eliminations	401			418			51			113
Total Operating Income	$	84,096		$	77,758		$	21,819		$	16,171
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