Greetings and thank you for standing by. Welcome to the Chesapeake Utilities Corporation 2022 Third Quarter Financial Results Conference Call. This conference is being recorded, Thursday, November 3, 2022. And now I would like to turn the conference over to Alex Whitelam, Head of Investor Relations. Please go ahead.

Thank you, Scott and good afternoon everyone. As always, we appreciate everyone joining, especially so late in the day. We will be highlighting Chesapeake Utilities’ results for the third quarter and through the first 9 months of 2022. As you saw in our press release issued yesterday, the company continues to drive solid financial performance in 2022 despite a challenging economic environment. Chesapeake remains well positioned to deliver solid earnings growth for the year, which speaks to our proven growth strategy and very talented workforce. As shown on Slide 2, participating with me on the call today are Jeff Householder, President and Chief Executive Officer; Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Corporate Secretary; and Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary, and Chief Policy and Risk Officer. We also have other members of our management team joining us virtually. Today’s presentation can be accessed on our website under the Investors page in the Events & Presentation subsection. After our prepared remarks, we will open the call up for questions. Moving to Slide 3, I’d like to remind you that matters discussed in this conference call may include forward-looking statements that involve risks and uncertainties. Forward-looking statements and projections could differ materially from our actual results. The Safe Harbor for forward-looking statements section of the company’s 2021 Form 10-K provides further information on the factors that could cause such statements to differ from our actual results. Additionally, the company evaluates its performance based on non-GAAP adjusted gross margin and has provided the appropriate disclosures in accordance with the SEC’s Regulation G. A reconciliation of GAAP gross margin to non-GAAP adjusted gross margin is provided in the appendix of this presentation and in our earnings release. Now I will turn the call over to Jeff to provide some opening remarks on the company’s financial results and the key drivers of our performance. Jeff?

Thank you, Alex. Good afternoon and thank you for joining our call today. Starting on Slide 4, I’d like to take a moment to thank all of my colleagues for their continued hard work and dedication to our mission. I was especially proud of our team for their preparation and response to Hurricane Ian in late September, which impacted much of Southwest Florida. Our service territory somewhat miraculously was largely spared in those areas that were affected; we were able to quickly restore service. We recognize that we were very lucky. And just last week, we announced a $100,000 donation to three different organizations who are responding with needed food, shelter, and other resources for those who were impacted by the storm, just a really outstanding job by our folks in Florida. And I thank all of our employees who continue to protect our customers at the forefront of all that we do. I’d also want to thank the team for their tremendous efforts throughout the quarter. Obviously, this was a quarter where we saw impacts from the significant inflationary environment we face, along with ever-increasing interest rates. In spite of those impacts, our team delivered solid performance in the third quarter. As you’ll recall from previous discussions, the third quarter typically reflects the least seasonal margin production for us and one where the marketing contribution does not fully offset our quarterly fixed operating costs. This is particularly the case in our propane business. And certainly, now that we’ve grown that business through acquisition over the past few years, that impact is magnified. Even with the seasonal impact, the inflationary pressures, and the significant interest expense increases, we are pleased with the results we delivered in the quarter and certainly through the first 9 months of the year. And I’m confident we will finish 2022 with yet another year of strong performance. Adjusted gross margin grew by an incremental $6.9 million in the third quarter, which just to reiterate, is seasonally the least impacted by weather. This growth was driven largely by our recent acquisitions, transmission service expansions, replacement programs, and strong natural gas distribution customer growth in both our Delmarva and Florida service territories. We also saw increased demand for services in our other businesses. Earnings growth in the quarter, however, was impacted by one-time nonrecurring items, both this year and last. These included the absence of the regulatory deferral of COVID-19 expenses and a favorable income tax impact associated with the Cares Act, which benefited EPS in last year’s third quarter by $0.13. In this year’s third quarter, we received interest income from a federal income tax refund, which added $0.03. Combined, these unusual items netted to a $0.10 negative EPS impact for the quarter. On a year-to-date basis, nonrecurring items, including the ones I just mentioned, and the gain on the sale of assets in the second quarter, netted to a $0.04 negative impact. Along with these unusual items, increased interest expense also had a year-over-year negative impact on earnings as interest rates continue to rise in this inflationary environment. We took multiple steps in the quarter to mitigate our exposure to rising interest rates, including securing $80 million in long-term debt to add further strength to our balance sheet and better align the company for future growth. We also entered into interest rate swaps for a portion of our long-term debt – of our short-term debt, excuse me, and Beth will touch upon all of that in just a few minutes. EPS grew by 3.8% on a year-to-date basis compared to the same period last year. Nonrecurring items and higher interest expenses were key drivers on a year-to-date basis. Absent the one-time nonrecurring items in both years, operating income increased by 9% year-to-date. We still project EPS growth for the year to be in line with our long-term expected growth rates. Additionally, the high levels of customer growth we’re experiencing in our service territories while providing significant opportunities to deploy capital to expand both our transmission and distribution systems. Customer growth in both our Delmarva and Florida service territories was exceptional in the third quarter. As we discussed on our last call, our business has also continued to manage supply chain and regulatory challenges that are resulting in delays for our capital projects. That said, we expect more investment in the fourth quarter, allowing us to reach our updated guidance range of $140 million to $175 million for the year. Earlier today, we previewed our 2023-2027 capital budget with our board. It’s exciting that we continue to see capital investment opportunities across our growth platforms that will bode well for the next 5 years. And as a result, we continue to reaffirm both long-term capital expenditure and EPS guidance for 2025. Turning to Slide 5, one of the capital opportunities that has been in our business development finally came to fruition. Yesterday, we announced the acquisition of Planet Found Energy Development. Turning to Slide 5, I’d like to provide some highlights. Planet Found nicely complements and accelerates our renewable energy delivery solutions portfolio focused on pull-free ways to energy production. Located in the Eastern State of Maryland, Planet Found provides three fundamental benefits to our renewable energy investment objectives. First, the acquisition provides internal technology expertise, especially related to organic fertilizer production, which is an important economic component in poultry waste biogas. They already have a high-quality nutrient-rich soil conditioner that’s being marketed on the Delmarva Peninsula under the brand name Element Soil. Second, Planet Found operates a small poultry biogas facility in Maryland that we will primarily use as a test facility that will help us verify waste and produce a renewable natural gas stream and fertilizer chemistry on future projects, useful in both financial projections and potential regulatory treatments. The third is that Planet Found is currently developing a biogas site in Maryland that we can expand and complete. And if I add the fourth point, it would be that the Planet Found technology and processes are scalable for growth going forward. On Slide 6, I’d like to dive in just a little deeper into our strategy behind this transaction. Utilizing Planet Found’s knowledge expertise and patent-pending technology, which combines analytic digestion and nutrient capture, they will allow us to accelerate our R&D strategy as we will be less dependent on developers for the projects we’re exploring. Not only can this model be replicated across the Delmarva Peninsula, but this transaction will accelerate Chesapeake Utilities' efforts in converting poultry waste to renewable, sustainable energy off of Delmarva’s well. Joining the Chesapeake team are two employees who are experts in the field and will significantly contribute to our sustainable investment strategy going forward. Further product time will help us drive even stronger relationships with stakeholders who are integrated into the Delmarva region’s robust poultry farming sector and who may benefit from the use of this technology. The acquisition is also located in Somerset County, Maryland. And you may recall that we recently completed an extension of our gas transmission system and are currently building natural gas distribution systems in Somerset County. And we are committed to providing safe affordable energy and to continue to support economic development and job creation in this county. And of significant importance, Planet Found, which originated from the University of Maryland’s Eastern Shore, allows us to work with partners, including UMS, across the region to mitigate the environmental challenges associated with poultry waste. And as we have said before, this has been a driving factor in our support of RNG production on Delmarva down along the East Coast. Let me now turn to our five growth platforms on Slide 7. Again, we continue to experience exceptional organic growth in our natural gas distribution businesses across both of our service territories. Third quarter customer growth was 5.8% on Delmarva and 4.4% in Florida, which continued to be well above the national average. Despite increased inflationary pressures and rising mortgage rates impacting the international housing market, the level of population growth we’re experiencing shows the highly attractive nature of our service territories, especially along the Delaware beaches and across Metro Florida. While we expect customer growth levels to fluctuate somewhat in the future, we continue to see sustained demand over the long term as our builders are reporting strong backlogs with natural gas and propane being the energy sources of choice for homebuyers. As we have discussed, the high levels of customer growth we are experiencing in our distribution business also drive the need for additional capacity in our transmission systems as well. We remain on track with the beachside transmission pipeline project along with the Winter Haven in the St. Cloud on Twin Lakes expansions in Florida. And yesterday, we received final approval from the Florida Public Service Commission on a $24 million phased-in Peninsula Pipeline expansion to serve additional growth in Nasal County, Florida. On Delmarva, the Eastern Shore southern expansion of compressor upgrade and the North Ocean City Connector projects also remain on track. Following completion, these projects will deliver significant margin growth and Beth will speak about these projects more in just a moment. We also continue to drive nice growth in our propane business. During the quarter, we introduced our autogas offering in North Carolina, opening the first fueling station in Dan, North Carolina. This service brings a clean-burning alternative to thicker fuel to the region. Autogas substantially reduces greenhouse gases and other harmful emissions compared to the use of gasoline and diesel fuel. This new autogas service follows our recent expansion into the Carolinas through the acquisition of Diversified Energy and the subsequent acquisition of Maven Port Energy's SolarCity Poline division. Through the first 9 months of the year, these acquisitions have driven more than $7 million of incremental adjusted gross margin. We spent considerable time integrating these acquisitions into the Sharp propane family of businesses. During the quarter, we also secured approximately 9,000 gallons of renewable propane, which is being used to fuel our own fleet and lower Chesapeake’s overall emissions. Renewable propane is produced from 100% renewable oil materials such as fats and oils. While the availability of our global propane is limited, we will continue working to procure the sustainable fuel and reduce the carbon emissions of our fleet serving our propane businesses, which largely has been converted to autogas already. Propane remains a core component of our growth strategy as a highly complementary energy source, allowing us to reach customers for whom natural gas is not available. And as you can see, our propane business not only allows us to drive higher financial performance, but it also allows us to do the right thing for our customers and communities by reducing greenhouse gas emissions. Marlin Gas Services also continues to add value for the organization, adding $1.2 million and $2.1 million in adjusted gross margin during the quarter and through the first 9 months of the year respectively. While many mobile transportation companies, Marlin is working to overcome higher transportation costs and labor shortages, especially with respect to our highly trained transport drivers and compressor operators. Despite these challenges, Marlin continues to identify and capitalize on opportunities that leverage its virtual pipeline solutions, and we’re excited for some of those opportunities to come to fruition. And on the sustainable investment front, while the Planet Found acquisition is an important step forward to expand our sustainable energy business, we continue to pursue a number of RNG opportunities throughout Delmarva and along the East Coast that will allow us to meet the sustainability needs of our customers and also make a positive impact on our local communities. We have also recently completed a scheduled replacement of our natural gas turbine in the Eight Flags CHP facility on Amelia Island in Northeast Florida. The new turbine will allow us to continue testing hydrogen with higher concentrated wins in the combined heat and power plant. Our next phase of hydrogen testing is currently planned for the first quarter of 2023, and we look forward to delivering the results of this testing and furthering our hydrogen initiatives. And with that, I’ll turn the call over to Beth to discuss our results in more depth. Beth?

Thank you, Jeff, and good afternoon, everyone. I’d also like to recognize our team for their incredible response to Hurricane Ian. I’m continually amazed by the work of our team as they make positive impacts for our customers and the communities we serve. I’m equally impressed by the perseverance shown by our team as we continue to manage through a challenging economic environment while still achieving solid financial results during the quarter and on a year-to-date basis. Let me provide some additional details on our recent performance. As you’ll see on Slide 8, diluted earnings per share were $3.58 per share through the first 9 months of the year. This represents a 3.8% increase over the same period in 2021. Keep in mind, this reflects only 1 month of interim rates associated with the Florida rate case and also a 15% increase in interest expense. More specifically, some of the key margin drivers year-to-date included contributions from the acquisitions of Diversified Energy, Davenport and the Escambia meter stations, continued pipeline expansions and strong organic customer growth in our natural gas distribution businesses, additional growth from the various regulated infrastructure programs and recovery mechanisms in our Florida, Elston and Eastern Shore business units, increased demand for Marlin CNG, RNG and LNG services, higher margins per gallon in our legacy propane businesses; and finally, increased margins at our Aspire Energy business in Ohio. On Slide 9, our financial summary shows adjusted gross margin increased $6.9 million year-over-year for the third quarter and $23.7 million year-to-date through September 30 compared to the prior year period. I’ll discuss the one-time non-recurring items that impacted operating income growth for the quarter. But as you can see, prior interest charges of 25% as a result of rising rates impacted earnings growth in the quarter. Through the first 9 months of the year, operating income was just shy of $100 million, up 6%. And again, EPS grew by 3.8% over the same period in 2021. On Slide 10, we provide a more granular look at the contributing factors that impacted EPS during the quarter. Let me go over some of those additional details. First, as you will recall, in the third quarter of 2021, we recognized the one-time benefit of $0.08 per share tied to the regulatory deferral of certain COVID expenses. We also recognized a $0.05 favorable tax gain from the Cares Act in the same quarter. The absence of these benefits, partially offset by $0.03, as Jeff mentioned, tied to interest income received from the IRS for a federal tax refund, meant that unusual items netted to a $0.10 negative impact to EPS in the quarter. Contributions from the acquisitions of Diversified Energy and Davenport Energy’s Siler City Protein division generated an incremental $0.06 in earnings for the quarter. Our core businesses delivered additional margin contributions that increased earnings by $0.22 per share. This includes higher adjusted gross margin from transmission expansion projects, natural gas distribution organic growth, increased margins from our Marlin business, higher performance from our protein and Aspire operations, along with additional income from our regulated infrastructure programs and recovery mechanisms. Operating expenses tied to the propane acquisition were $0.10 per share. As a reminder, we generate significantly more margin in the propane business during the first and fourth quarters, while the business has a normalized level of operating expenses that occur more evenly over the year. These increased expenses can lead to operating losses during the second and third quarters, largely dependent upon whether we get colder weather in some of the shoulder months. There has also been additional spending to align our acquisitions with Chesapeake’s operating and safety standards. These investments are poised to deliver long-term success for the business. In our core businesses, higher expenses drove an $0.08 impact, which speaks to our team’s ability to manage costs across the business. Higher depreciation, amortization and property tax costs associated with new capital investments were a $0.07 headwind. As we’ve been discussing, interest and other expenses were a significant $0.09 negative impact to earnings for the quarter. Finally, change in share count due to recent equity offering added a $0.01 headwind. On Slide 11, we portray a similar bridge, so I won’t walk through all the details. But as you can see, we generated solid growth from our acquisitions and our core businesses continue to grow exceptionally well, while higher interest and other expenses weighed on overall performance. I’d like to add that we appreciate the more complex than usual nature of the quarter and the year-to-date period. There are a number of moving parts. But when we took a step back, we were pleased with the results. Let me touch on Chesapeake Utilities operating segments on the next two slides. On Slide 12, you’ll see adjusted gross margin was up 7.1% for the quarter and 6.2% year-over-year for our Regulated Energy segment. Year-to-date operating income growth was driven primarily by pipeline expansions from our transmission pipeline, organic growth in our natural gas distribution systems, incremental contributions from our various infrastructure programs, 1 month of interim rates associated with the Florida natural gas base rate proceeding and contributions from the Escambia Meter Station acquisitions. Higher operating expenses largely tied to facilities, maintenance and outside expenses contributed to operating income growth of 1.3% for the quarter. For the year-to-date period, operating income increased by 6.8% over the first 9 months of 2021. This included a $2.5 million reduction in other operating expenses resulting from that regulatory deferral of certain costs associated with the COVID-19 pandemic. Absent this benefit in 2021, operating income increased $7.9 million or over 10%. Turning to Slide 13. Our unregulated segment drove impressive year-over-year adjusted gross margin growth of 15.1% and 14.8% for the third quarter and year-to-date periods, respectively. This margin growth was driven primarily by contributions from diversified energy and Davenport, increased margins for our propane distribution business, increased demand for Marlin services, and improved performance at Aspire Energy. That said, the seasonality aspect of the business and higher costs from transportation fuel, labor and other rising costs impacted the unregulated segment more significantly. On Slide 14, I’ll mention a few updates on the balance sheet and also discuss the actions we took in the quarter to mitigate some of the risks associated with rising interest rates. In September, we announced our commitment to issue $80 million of 15-year senior notes with an average 10-year life to Prudential at a coupon of 5.3%. The notes are expected to be issued in March 2023. Additionally, we also entered into 3-year interest rate swap agreements for $50 million of our short-term debt at a fixed rate of 3.98%. These transactions complement the $50 million of long-term debt we placed at a coupon less than 3% earlier this year. Year-to-date, interest expense has been an incremental $2.3 million over 2021. Additionally, as we look at the forward curve, we expect interest rates to remain higher over an extended period of time. This will continue to add pressure on our financial performance, but we factor that into our projections and seek to overcome this impact through other mitigating strategies, including cost management, additional hedging, alternative financing, and regulatory mechanisms. At the end of the third quarter, total capitalization represented approximately $1.6 billion. This included 51.3% of stockholders’ equity, which is now $814 million and within our target capital range, 36.8% of long-term debt at an average fixed rate of 3.38% and short-term debt decreased from $222 million at year-end to $167 million, with $50 million attributable to the long-term debt financing in March. As a result of the actions we took this quarter, our balance sheet remains strong and well positioned to support our capital investments, which drive our earnings growth and further enhance shareholder value. Moving to Slide 15, we highlight the pipeline expansion, the CNG, LNG and RNG transportation projects, acquisitions and strategic regulatory initiatives that will drive our growth through 2023. As always, we remind you that this table does not include organic growth, and it is not indicative of all the projects that we are evaluating and pursuing. As Jeff mentioned, we continue to be excited about the projects we have in our pipeline of growth opportunities. These projects and others not yet announced are poised to deliver higher margin growth across our businesses. Further opportunities like Planet Found and others that we are pursuing on the sustainable investment front provide a path for long-term sustainable growth. We look forward to bringing these projects to fruition. We will continue to share details on these projects as they become available. One other item to call out on this slide is the interim rate for the month of September that we recorded in quarter three. Interim rates are subject to refund pending the final outcome of the Florida natural gas base rate proceeding. So we kept placeholders for the full year impact of 2022 and 2023. Jim will provide additional details on this in just a moment. Absent any interim rates from the Florida rate case, we expect the projects that are already underway will add more than $21 million this year and approximately $6 million in additional margin in 2023. At a minimum, if our rate case is not settled, we will record 3 months of interim rates during the fourth quarter. Finally, as a reminder, as new projects or initiatives are announced or finalized, we will add them to this table. Moving to Slide 16, we highlight our key pipeline expansion projects with an investment of approximately $140 million. These projects are expected to contribute more than $20 million in adjusted gross margin. With that, I would like to close with a few final thoughts as we push towards year-end. We believe we are positioned to generate overall solid earnings growth for 2022. We have strong organic growth that is continuing, pipeline expansion opportunities, additive regulatory activities, including the Florida rate case, and opportunities within our unregulated businesses. We will work hard, as we always do, to deliver our 16th year of consecutive earnings growth. And with that, I will now pass the call off to Jim Moriarty to discuss our regulatory and ESG update.

Yes. Good afternoon, Beth and good afternoon, everyone. I am just trying – believe it or not, to get my script here. I apologize. I picked that an earlier one. One second, please. Okay. Here we are. On Slide 17 and 18, we list our ongoing regulatory initiatives, including details on the natural gas base rate case proceeding in Florida. The company is seeking approval for an approximate $24.1 million permit increase. In August, the Florida PSC approved interim rates of approximately $7.7 million on an annualized basis. The interim rates went into effect for all meter readings starting in September of this year. As Beth mentioned, the interim rates are subject to refund pending the final outcome of the rate case. The discovery process concluded in early October with the hearings just completed. As part of the hearings, over 15 team members testified as experts in their respective areas. I would like to commend each of those folks for the fine jobs that were done. We are very proud of the team and the case that was presented and look forward to the Board of Public Utility – the Florida Commission issuing its decision shortly. Florida Public Utilities Electric business recently filed a storm protection plan and storm protection plan cost recovery mechanisms with the PSC. These plans allow for the recovery of investments to further protect our electric system in the event of a storm and prevent loss of service. Hearings for the storm protection plan concluded in August, and modified approval was provided in October. Bearings for the storm protection plan cost recovery are scheduled for the coming weeks with rates to go into effect starting in January of 2023. Additionally, Florida Public Utilities continues to make significant progress with the gas reliability infrastructure program that began in 2012. Through the end of the third quarter, we have invested more than $200 million to replace approximately 351 miles of qualified distribution mains, increasing the safety and reliability of our systems for many Floridians. In Elk and Maryland, we continue to invest in the systems integrity by upgrading our Autoliv pipeline. The program went into service towards the end of 2021, and going forward, we expect the project will generate $200,000 in adjusted gross margin in 2022 and $400,000 in 2023. Finally, our Eastern Shore natural gas interstate transmission unit has authority to recover capital costs associated with mandated highway and railroad relocation projects, along with FEMSA required safety upgrades. We expect that this program will generate $2 million in additional adjusted gross margin in 2022 and 2023.

Thank you, Jim. Turning to Slide 21, let me reiterate the comments I made in my opening remarks. Despite the challenges we and many companies are experiencing in this dynamic economic environment, we continue to have a strong positive outlook for 2022 and the future. And that’s why we are reaffirming our long-term earnings and capital expenditure guidance. In 2025, we expect to deliver diluted earnings per share in the range of $6.05 to $6.25. This represents a compounded annual growth rate of 9.1% to 9.5% over the 5-year period. While we may see short-term pressure as we experienced in the third quarter, we maintain our position that the projects in our pipeline of opportunities will deliver strong earnings growth. Given that pipeline of projects, we also continue to expect to deploy $750 million to $1 billion in capital expenditures during the same period. While we’ve experienced some project delays resulting from supply chain disruptions and regulatory timing, we have strong conviction in our ability to get these projects across the finish line. Our Wildlife transmission pipeline project mentioned earlier was a good example of significant projects gaining approval, where construction will commence very soon. In the third quarter, our pace of capital expenditures picked up through September 30, and we’ve deployed more than $95 million on capital expenditures. Given this momentum and the projects we have slated through the end of the year, we continue to expect to invest between $140 million and $175 million in capital projects in 2022. To conclude, we remain well positioned to deliver strong earnings growth in 2022 and beyond. Chesapeake Utilities has a long history of leveraging volatile economic cycles. We’ve always emerged a stronger company each time. Our strategy and business model are proven, and we have a strong balance sheet that positions us well to capitalize on future growth opportunities, both within our regulated footprint and our unregulated complementary businesses. While challenges remain on the horizon, our focus on delivering top quartile financial performance better waivers. And with that, Alex, why don’t we open it up for questions?

Thanks, Jeff. Scott, why don’t we open up to questions?

Our first question is from the line of Tate Sullivan with Maxim Group. Please go ahead. Your line is now open.

Hi, thank you. Good afternoon. First on the Planet Found acquisition, please, and the CNG, RNG, and LNG transportation and infrastructure gross margin forecast for 2022 for $9.5 million and $23 million for $10.5 million. Does that – and it was unchanged, I believe, from the prior quarter that were there some moving parts in that forecast for gross margins? And does that not include Planet Found?

So thank you, Tate. I’ll start this off, and then I’ll ask Jeff to add any additional commentary. So with Planet Found, the real purpose in buying that business, as Jeff talked about, was the technology and the capabilities that they bring to the table and something that we can use to scale future projects. It is not a very large current – it doesn’t have a very large business profile at the present time. So given the size that it currently is and the runway that we have before we deploy that in our next project, we did not want to stand up any estimates at this time. Certainly, for 2022, we will be taking a closer look at 2023 and the projects that we have on the horizon and see if there are any adjustments that we need to do in time for our year-end release that will come out in February. And Jeff, I don’t know if there is anything you would like to add.

No, I think that covers it. Again, Elkton has a project site under development, and we will obviously take that over and work towards constructing the projects that they are working through permitting right now. But that, I think, summarizes it; this is a relatively small acquisition. It comes with technology that we think is useful in continuing to expand our RNG footprint, especially in the propane business. And it also, again, as we mentioned, comes with a nice test facility and the opportunity to continue to develop the projects that they have underway and expand our business profile, our footprint in Somerset County, Maryland.

Okay. Thank you. And on slide, I believe it is Slide 10, where you detailed a year-over-year EPS change and the $0.10 tied to recent acquisitions and Beth you gave good detail on that. Do you – I mean was this out of – I mean I think it was a large propane acquisition from last December, Diversified Energy Group. Do you experience more expenses than normal integrating that, or I mean was it just the timing that you decided to incur those expenses integrating their systems? Can you provide more detail on that integration? And maybe did you even consider excluding those expenses that may be one-time in nature, too?

Well, certainly, I mean one of the things that’s exciting about this acquisition is that, for us, it’s build in when you look at our footprint, right. We were primarily south all the way to Virginia. If you think about that Pennsylvania, Delaware, Maryland, and Virginia service area. And then you look at Florida, and there are some things that we do kind of going into Georgia with Marlin’s opportunities and our new – the new CNG station that we are servicing there. So, this acquisition enabled us to come into North Carolina and South Carolina. But when you do that right, you are standing up a brand-new presence in new states, which is very different than if you look at the acquisitions that we have recently done, right. If you turn the clock back and you look at all, that was in Pennsylvania. If you look at Bowen, that was in the Elkton, Cecil County, Maryland and into Delaware. So, it overlapped with us, right. And if you look at Western Natural Gas, which we announced previously as well, that was in Florida. All opportunities that we were able to capitalize on our presence, right. We already had operations there; we can leverage the way that we are doing business. So, as we brought Diversified in, it’s working together to adopt the practices that Sharp has had in place for many years. And so that includes programs. It includes the way we operate and since operational safety standards, etcetera. So, there are going to be incremental costs that are associated with that. And then as we look to branch out even from that footprint, right, there is going to be additional costs. So, those costs were expected, but they do impact particularly when you are looking at a quarter that does not have a lot of margin contribution. The third quarter is our lowest margin contribution for that particular part of our business.

Okay, good. Great. Thank you, Beth. And last, if I may Jeff, in terms of the RNG opportunities. I think it was last month that BP announced an acquisition of RNG producer, Archaea, interest from large oil companies in RNG, does it create more competition to secure RNG projects, or is it good for your existing RNG projects, if you can comment…

I think there are two things to be said about that. One is the RNG projects that we are principally interested in, certainly the ones that we are pursuing from a developmental perspective. One, are primarily in our backyard, they require some support from our pipeline systems to provide market paths. They are working with a variety of customers and politicians, regulators, and others that we know quite well. And most of them, almost not quite all of them, but most of them are focused on poultry waste. And poultry waste is a tricky thing to deal with. And we think we are a long way up the curve beyond where virtually anyone else is figuring out how to produce biogas and renewable natural gas from poultry waste and, as importantly, the economics of those projects deal with the organic fertilizer coming out the other side of the plant. And so there are some competitive barriers that exist that we like and that gives us, I think, a leg up; and that’s one of the reasons we were interested in the Planet Found acquisition because we think that, again, moves us a little bit further up the curve on the technology side with some people that understand how all of that works, that now are working for us directly. And so we don’t see the BPs and the Shells and the other folks that are actively engaging in biogas projects as a significant source of competition at this point. And in fact, we are working with a number of those folks and their energy marketing arms to make sure that we get the RNG that we ultimately will produce into the marketplace at an appropriate economic point. And so with that’s going into California, going into the Federal programs, or up into Canada or wherever it may be going. We find that there are large fuel marketing groups, many of them attached to the large oil and gas companies that you are describing, that are quite helpful in taking along the risk of those projects, frankly, on the downstream commodity side.

Thank you very much for coming on that, Jeff, and thanks all.

Sure.

Our next question is from Brian Russo with Sidoti. Please go ahead. Your line is now open.

Yes. Hi. Good afternoon.

Hey Brian.

Hi Brian.

Just a follow-up on Planet Found, it seems like a nice foundation for growth. I mean how quickly do you think you can deploy capital and leverage that over the next several years, to start to be more of a meaningful project contributor?

Well, we have already got the technical expertise of the folks that are principles in that company. And as we mentioned in the remarks, a couple of them are actually becoming employees of ours, and others that are on the sort of academic science side will certainly continue to contribute, I think on a consulting basis going forward. So, there is pretty much an immediate contribution helping us evaluate and design some of the other projects that we are looking to develop. And so I think that happens pretty quickly. We are looking now at how quickly we might be able to move forward with a relatively small site in Maryland that they have under development and whether we have opportunities to expand that a little bit, and we probably do. And so I think you will be hearing about that over the next several months as we get a little further down the road to think about when they might be able to actually bring up before a board and something we get approval then move forward with construction.

Okay. Great. And then just on the interest rate sensitivity. You mentioned the interest rate swaps before and then the $80 million you are going to term out. How much of the short-term debt kind of is left and exposed in a rising interest rate environment? And is that roughly $6.2 million of interest expense reported in the third quarter, is that kind of considered a run rate with this current level of debt?

Sure. So, if you look at where – Brian, we ended the quarter as of the end of September, we had about $167 million in short-term debt at that time. So, that $80 million and that $50 million, we have taken a big chunk of that short-term debt and either through long-term debt or through the swaps that we have entered into, that leaves about $30 million that’s still variable at this point. And so we are continuing to evaluate, and we will do so on an ongoing basis. Certainly, with where interest rates are and our target capital structure, we will evaluate what type of financing should be utilized for that. We have certainly a lot of options. So, again, we have taken a big chunk of it. We placed it long-term. I think hopefully, that will help as you think about our interest costs and project those out into next year what kind of interest expense increases that will be expected. The offset to some of that, certainly, is as we went into our rate case in Florida, we were using and looking at what the forward rates for at the time. And so that also goes to my comment about we look at things like rate cases that we are involved in and other mechanisms to try to also offset some of that cost.

Yes. That was actually my next question would be can some of this inflationary environment as well as the rising interest rate environment be captured in this Florida rate case. So, it seems as if can you adjust what’s currently filed or was at that specific point in time that you looked at the forward curve?

It was certainly at the time that we looked at it. But as our team has been in over the last week participating in the hearing, that is certainly something that is discussed. We certainly looked out as best we could at the time that we made our filings and then have included in some of our comments where those costs have gone. But some of that was reflected in the filing that we made, not all of it, but certainly some of it was. And so we try to do that with all of our expenses as we look out. So, again, some of it will be captured. Some of it will be closed, but that case isn’t settled yet. And so we will have to wait and see where the ultimate outcome is. But again, some of it will be captured there.

Okay. Great. And then lastly, just on the year-to-date CapEx of $95 million and the target for the full year, it implies kind of $55 million, I think, to $80 million of CapEx in the fourth quarter. And I am just wondering what’s the profile of that CapEx? Are those new projects that were delayed last quarter that are going to ramp up, or is that already projects that are well along in their spending profile?

They would primarily be, Brian, those projects that, like Jeff talked a little bit about the North Ocean City Connector project. That’s a project that we are, for the most part, going to be finishing that up by the end of this year. So, that will be out there to finish. We also have some other projects that are underway, some of the pipeline expansions that are already in motion. They may not finish until next year, but there are parts of those that we will be working on. So, it could be not to say, in the past, we have had some small transactions that we have announced last year. There was a big one right at the end of the year that really added to our CapEx. But most of what’s inherent in that capital forecast are going to be things that are moving along. And again, we feel pretty confident about that those capital expenditures are already in the queue.

Okay. Great. Thank you very much.

Thank you, Brian.

And we have a question from John Bartlett with Reaves Asset Management. Please go ahead. Your line is open.

Hi. Good afternoon. A question for Beth and a question for Jeff. Beth, just to go back to Brian’s question for a second, I don’t mean to belabor this, but I guess I will. Just on the question of run rate, exit rate, whatever you want to call it, clearly, those swaps, which I am sure you are pleased with now, were done at some point during the quarter. And as a consequence, some of the impact is going to be felt in the future. Can you give us a little bit more color on that?

Sure. I mean we are constantly looking at different projects, etcetera, that are going on in initiatives that are underway. And so determining when the appropriate time to pull some of that down and lock in, I mean it was evaluated as we started this year and just with the things that we were evaluating throughout the organization. And so it really, for us, became an opportunity when we came into the third quarter, looking at some of the projects that were out there, etcetera, and some of the financing that we were looking to do. It was the optimum time for us to lock both of those in. And we had incorporated, as I mentioned, some of that into our rate case proceeding. So, at the same time, we worked pretty aggressively on our revolvers to get our pricing even more competitive. So, you saw some of that come through in our most negotiated pricing that we did on the revolver. And then lastly I would say, we also had a placement earlier in the year that was done at well under 3%. So, overall, I am pleased our overall long-term debt rate is sitting at about a 3% - less than a 3.5% average rate. Certainly, the short-term could we have locked it in earlier, yes, but we were looking at several different things across our business and it did not align for us to lock in earlier in the year.

No. I understand it. But I am sorry, just kind of where I am going. It sounds like most of the activity was sort of front-end loaded into the quarter. And so that impact...

Yes. Well, it was, but I will tell you, John, what’s really happened is even if you set that a five, frankly, because we don’t have the long-term placement until March of next year and the swaps were done on September 30th. It was really the fact that we have gone to from a short-term debt perspective, you have seen short-term interest rates move almost 400 basis points in a year, right. So, we started the year off well under 1%. They are now not quite 400 basis points above that. But there has been such a move, that’s really the headwind that you saw in the third quarter, not so much the cost of what we did in the recent placement.

You are right. No, I understand that you pulled the ripcord on the swaps, but that – what you are telling me is, in essence, that happened fairly early in the quarter. The placement is going to be placed when it is, and it’s been swapped. So, other than that, it seems like what you did this quarter is a reasonable expectation, absent incremental spending, of course, is a pretty good replication of what we are going to get next quarter. That is to say you felt the pain in the numbers, plus or minus what the Fed does.

That’s correct. That is absolutely...

Yes. Okay. That’s all I was trying to get at. Okay. No, terrific, Beth. Thank you. And then Jeff, just for you, I guess a question, it’s a little bit more challenging, but I just really want a high-level answer. I want to drill down too far. But you have obviously – everybody in corporate America felt cost creep across their businesses and you naturally are feeling at this quarter. And presumably in previous periods, how would you term the momentum of that, the first derivative, is it accelerating? Is it slowing down? Is it staying roughly the same? What’s your sort of view of your suite of businesses on that front?

Well, I think obviously, and this is clearly obvious, if you look at expenses other than O&M expenses, the ones that Beth was talking about relative to interest rates and whatnot into the project, we continue to see those increasing. We thought that would flatten out some next year. I am not so sure that’s true at this point, I guess we will see. On the O&M side, we have actually, over the last several years, we have been tracking those O&M expenses down as a percentage of gross margin, for example. And so we have got a decent handle on that. I would be the first to tell you that some of that is not intentional because we have had the same difficulties, hiring and retaining staff as you hear about every day for companies across this country. We have done, I think, a nice job recruiting and replacing folks that have left and people that have retired, especially those that had enough during COVID and old enough to take the package and go. And so, we have been able to maneuver around some of the other supply chain cost increases and certainly some of the inflationary increases that we are seeing. But I don’t see much of that flattening with a couple of exceptions. Our fuel costs have, in fact, come back a little bit. And we will see where that goes over the next few months that they skyrocketed on us and then they clamped out and actually came down some. So, there are a few things like that that I can feel at least halfway good about. Our employee expenses will, I believe, continue to go up. There is a lot of inflationary pressure related to the types of annual merit increases that we would normally provide to employees and what those look like. So, I don’t think you are going to see any significant fall back in expenses anytime soon. And I am of the opinion that we are going to continue to see increased pressure on those costs. The same is happening in our capital projects. And so, the price of steel is moving around, the price of labor to install that steel has really increased significantly. That’s not the world’s most optimistic forecast, but I think that that’s probably what we are facing and certainly what we are planning for.

That’s terrific, Jeff. Thank you so much. I really appreciate it.

Those are all the questions we have for today. I would now turn it back over to Jeff Householder.

Well, thanks for joining us today. I want to probably sound like a broken record, but I want to say this one more time. We really do believe that we are well positioned, and we are very confident that we can continue to deliver strong earnings growth in 2022 and beyond. In this season, Thanksgiving well, that’s a little bit early, I guess in November, but I want to express my gratitude and the company’s gratitude to all of our stakeholders, including those of you on the phone today. We appreciate your time, and we appreciate your continued interest in our company. Goodbye.

That concludes the call for today. We thank you for your participation and ask you please disconnect your lines.