Net income of $27.6 million, or $2.87 per share

Fifth consecutive year of record net income and earnings per share

Regulatory approvals obtained for the recovery of the $34.2 million acquisition adjustment in Florida

Growth in the energy businesses largely offset lower energy consumption, as a result of warmer temperatures

Natural gas expansions currently underway on the Delmarva Peninsula and in Florida position the Company for continued earnings growth

Chesapeake and Subsidiaries

Gross Margin ⁽¹⁾

Regulated Energy

Unregulated Energy

Other

Total Gross Margin

Operating Income (Loss)

Regulated Energy

Unregulated Energy

Other

Total Operating Income

Other Income (Expense)

Interest Charges

Income Taxes

Net Income

Earnings Per Share of Common Stock

Basic

Diluted

Heating Degree-Days — Delmarva Peninsula

Actual

10-year average (normal)

Heating Degree-Days — Florida

Actual

10-year average (normal)

Cooling Degree-Days — Florida

Actual

10-year average (normal)

“Gross margin” is determined by deducting the cost of sales from operating revenue. Cost of sales includes the purchased fuel cost for natural gas, electricity and propane and the cost of labor spent on direct revenue-producing activities. Gross margin should not be considered an alternative to operating income or net income, which is determined in accordance with GAAP. Chesapeake believes that gross margin, although a non-GAAP measure, is useful and meaningful to investors as a basis for making investment decisions. It provides investors with information that demonstrates the profitability achieved by the Company under its allowed rates for regulated operations and under its competitive pricing structure for non-regulated segments. Chesapeake’s management uses gross margin in measuring its business units’ performance and has historically analyzed and reported gross margin information publicly. Other companies may calculate gross margin in a different manner.

New natural gas transportation services generated $3.0 million in additional gross margin.

Growth in natural gas distribution customers generated $2.7 million in additional gross margin.

Higher retail margins per gallon in the propane distribution operations increased gross margin by $2.2 million.

Lower customer energy consumption, due primarily to warmer temperatures in 2011, compared to 2010, reduced gross margin by $5.2 million.

Several unusual items affected the Company’s results:

A reversal in 2011 of the $750,000 reserve recorded in 2010 due to the regulatory approval for recovery of the acquisition premium and merger-related costs;

$959,000 in lower sales and gross receipts taxes, due to an accrual in 2010 of $698,000 for potential additional taxes and the reversal in 2011 of $261,000 of the accrual as a result of the collection of those taxes from customers.

The absence in 2011 of $660,000 of merger-related costs expensed in 2010;

A gain of $575,000 related to the proceeds received from an antitrust litigation settlement with a major propane supplier;

A $553,000 gain from the sale of a non-operating Internet Protocol address asset;

Severance and pension settlements charges of $1.3 million;

BravePoint, Inc.^®’s (“BravePoint”) decline in operating income of $858,000, as a result of the launch of ProfitZoom^TM, a new product developed by BravePoint; and

Additional legal costs of $537,000 were incurred in 2011 as a result of an electric franchise dispute, for which we could incur a similar level of costs in 2012.

As previously disclosed, in August 2011, the Delmarva natural gas distribution operation entered into a new agreement to provide natural gas service to an existing industrial customer at two of its facilities located in southern Delaware. These new services are expected to begin in the first half of 2012 and generate estimated annual gross margin equivalent to 415 residential customers.

As previously disclosed, on December 22, 2011, Eastern Shore entered into a Precedent Agreement with NRG Energy Center Dover LLC (“NRG”) to provide firm natural gas transportation service to NRG’s electric power generation plant in Dover, Delaware. Eastern Shore has previously provided interruptible service to NRG at this plant. To provide the firm service, Eastern Shore will construct new facilities at an estimated cost of $12.5 million to $15.0 million. The Precedent Agreement provides that upon satisfying certain conditions, Eastern Shore and NRG will sign a 15-year firm transportation service agreement for a maximum daily quantity of 13,440 Dekatherms per day (“Dts/d”). This service is projected to commence in May 2013 and expected to generate estimated annual gross margin of $2.4 to $2.8 million. If the necessary facilities are not operational on or before December 31, 2013, or if Eastern Shore is not able to provide the firm transportation service by utilizing other capacity, either Eastern Shore or NRG may terminate both the Precedent Agreement and the firm transportation service agreement. Eastern Shore and NRG are proceeding with obtaining the necessary governmental and regulatory approvals associated with this service.

As a result of the regulatory approval for the recovery of the $34.2 million acquisition adjustment and $2.2 million in merger-related costs, the Company will begin to amortize those regulatory assets in 2012. Amortization expense is expected to be $2.4 million ($1.4 million, net of tax) in 2012 and 2013, $2.3 million ($1.4 million, net of tax) in 2014, and $1.8 million ($1.1 million, net of tax) annually thereafter until 2039.

Pension expense in 2012 is expected to be approximately $450,000 higher than 2011. A decline in the value of the Company’s pension assets during 2011 and lower discount rate assumptions based on a decline in market interest rates contributed to the increased pension expense projected for 2012.

(in thousands)

Gross margin for the year ended December 31, 2010

Factors contributing to the gross margin increase for the year ended December 31, 2011:

Decreased customer consumption, due primarily to weather

New transportation services

Net customer growth in distribution services

Florida natural gas regulatory reserve

Change in rates

Other

Gross margin for the year ended December 31, 2011

Customer consumption of natural gas and electricity decreased, both on the Delmarva Peninsula and in Florida during 2011, compared to 2010. The decline in consumption was due primarily to significantly warmer weather during the heating season, resulting in a year-over-year decrease of approximately $3.8 million in gross margin. In 2011, heating degree-days decreased by 13 percent, or 610 heating degree-days, on the Delmarva Peninsula and by 50 percent, or 748 heating degree-days, in Florida, compared to 2010. Measured against normal heating degree-days (10-year historical average) in 2011, the weather on the Delmarva Peninsula was six percent, or 278 heating degree-days, warmer than normal, and the weather in Florida was 18 percent, or 167 heating degree-days, warmer than normal. The Company estimates that this warmer-than-normal weather reduced gross margin of the regulated energy segment by approximately $2.1 million in 2011.

In January 2011, Eastern Shore, commenced new transportation service for 20,000 Dts/d of capacity associated with its eight-mile mainline extension to interconnect with TETLP’s pipeline system and generated gross margin of $2.0 million in 2011 from this service. Gross margin generated from this eight-mile extension, including the phase-in of additional service and the effect of the rate case settlement described further, later in the release, is expected to be $1.9 million in 2012 and $2.1 million annually, thereafter.

The Delmarva natural gas distribution operation generated $1.6 million in additional gross margin due to net customer growth. Gross margin from commercial and industrial customers for the Delmarva natural gas distribution operation increased by $1.2 million in 2011, due primarily to the addition of 20 large commercial and industrial customers since June 2010. These 20 customers are expected to generate annual margin of approximately $2.1 million in 2012. Two-percent growth in residential customers generated an additional $429,000 in gross margin for the Delmarva natural gas distribution operation.

The Florida natural gas distribution operations generated $771,000 of additional gross margin primarily as a result of a two-percent growth in commercial and industrial customers. In addition, 700 new customers, added as a result of the Company’s purchase of the operating assets of Indiantown Gas Company in August 2010, generated $377,000 of additional gross margin during 2011 due to the inclusion of a full year of results.

In January 2012, the Florida PSC issued an order, approving the recovery of $34.2 million in acquisition adjustment and $2.2 million in merger-related costs in connection with the Company’s acquisition of FPU in 2009. In the order, the Florida PSC also determined that no refund should be made to customers as a result of the 2010 earnings of the Company’s Florida natural gas distribution operations. As a result of the order, in the fourth quarter of 2011, the Company reversed the $750,000 reserve, which was accrued in the third and fourth quarters of 2010 based on the regulatory risks associated with the Florida natural gas earnings, merger benefits and recovery of the acquisition adjustment.

On January 24, 2012, the FERC approved the rate case settlement for Eastern Shore. The settlement provides for a pre-tax return of 13.9 percent. Also included in the settlement is a negotiated rate adjustment, effective November 1, 2011, associated with the phase-in of an additional 15,000 Dts/d of new transportation service on Eastern Shore’s eight-mile extension to interconnect with TETLP’s pipeline system. This rate adjustment reduces the rate per Dt of the service on this eight-mile extension by reflecting the increased service of 15,000 Dts/d with no additional revenue. This rate adjustment effectively offsets the increased revenue that would have been generated from the 15,000 Dts/d per day increase in firm service. In 2011, we recorded $409,000 in additional gross margin as a result of implementing the new rates pursuant to the settlement.

$1.2 million in higher depreciation expense and asset removal costs associated with capital investments;

$1.1 million in non-recurring severance and pension settlement charges;

$537,000 in increased legal costs associated with an electric franchise dispute;

$403,000 in additional expenses related to pipeline integrity projects for Eastern Shore to comply with increased pipeline regulatory requirements;

$375,000 in increased amortization expense related to the change in the recovery period of project costs associated with Eastern Shore’s former Energylink expansion project;

$355,000 in higher vehicle fuel costs; and

$896,000 in lower taxes other than income taxes, due to an accrual in 2010 for potential additional sales taxes and gross receipts taxes and the reversal of a portion of the accrual in 2011 as a result of the collection and remittance of those taxes.

(in thousands)

Gross margin for the year ended December 31, 2010

Factors contributing to the gross margin increase for the year ended December 31, 2011:

Volume decrease - weather and other

Increase in retail margin per gallon

Gain from litigation settlement

Propane wholesale marketing

Natural gas marketing

Miscellaneous fees and other

Gross margin for the year ended December 31, 2011

A decline in customer consumption, due primarily to a decrease in heating degree-days, resulted in decreased gross margin of $1.5 million in 2011, compared to 2010, for the Delmarva propane distribution operation. A decrease in propane deliveries to bulk customers, due to lower non-weather-related consumption and the timing of deliveries, also decreased gross margin by $1.3 million.

The propane distribution operations generated additional gross margin of $2.2 million due to higher margins per gallon for 2011, compared to 2010. Propane retail margins per gallon on the Delmarva Peninsula during the year ended December 31, 2011 returned to more normal levels, compared to retail margins per gallon in 2010. The lower margins in 2010 were caused by colder temperatures and higher cost spot purchases during the first quarter when the customer demand was the highest. Also contributing to the gross margin increase were higher margins per gallon in Florida as the propane distribution operation continued to adjust its retail pricing in response to market conditions.

The Company recorded a one-time gain of $575,000 in the first quarter of 2011 related to the Company’s share of proceeds received from an antitrust litigation settlement with a major propane supplier.

Xeron, Inc. (“Xeron”), the Company’s propane wholesale marketing subsidiary, generated $431,000 in additional gross margin in 2011, compared to 2010, due primarily to a 22-percent increase in trading activity.

The Company’s natural gas marketing subsidiary, Peninsula Energy Services Company, Inc. (“PESCO”), generated higher gross margin of $362,000 for the year ended December 31, 2011, compared to the same period in 2010. Favorable imbalance resolutions with third-party pipelines, with which PESCO contracts for natural gas supply, generated this increase. Such imbalance resolutions are not predictable and therefore, are not included in the Company’s long-term financial plans or forecasts.

(in thousands)

Gross margin for the three months ended December 31, 2010

Factors contributing to the gross margin increase for the three months ended December 31, 2011:

Decreased customer consumption, due primarily to weather

Florida natural gas regulatory reserve

New transportation services

Net customer growth in distribution services

Change in rates

Other

Gross margin for the three months ended December 31, 2011

Customer consumption of natural gas and electricity decreased, both on the Delmarva Peninsula and in Florida during the fourth quarter of 2011, compared to the same quarter in 2010. The decline in consumption was largely the result of significantly warmer weather during the quarter, which decreased gross margin by approximately $2.1 million. In the fourth quarter of 2011, heating degree-days decreased by 26 percent, or 465 heating degree-days, on the Delmarva Peninsula and by 61 percent, or 339 heating degree-days, in Florida, compared to the same quarter in 2010. Measured against normal heating degree-days (10-year historical average) in the fourth quarter of 2011, the weather on the Delmarva Peninsula was 16 percent, or 249 heating degree-days, warmer than normal and the weather in Florida was 33 percent, or 106 heating degree-days, warmer than normal. The Company estimates that this warmer-than-normal weather reduced gross margin of the regulated energy segment by approximately $1.5 million in the fourth quarter of 2011. Other non-weather-related increases in consumption slightly offset the weather-related decrease.

In January 2012, the Florida PSC approved the recovery of $34.2 million in acquisition adjustment and $2.2 million in merger-related costs. Pursuant to this order, the Company reversed in the fourth quarter of 2011, the $750,000 regulatory reserve previously accrued in 2010, $250,000 of which was accrued in the fourth quarter of 2010.

In January 2011, Eastern Shore commenced new transportation service for 20,000 Dts/d of capacity associated with its eight-mile mainline extension to interconnect with TETLP’s pipeline system and generated gross margin of $460,000 in the fourth quarter of 2011. Gross margin generated from the eight-mile extension, including the effect of the rate case settlement and the phase-in of additional service previously described, is expected to be $1.9 million in 2012 and $2.1 million annually thereafter.

The Delmarva natural gas distribution operation generated $341,000 in additional gross margin as a result of net customer growth. Gross margin from commercial and industrial customers for the Delmarva natural gas distribution operation increased by $241,000 in the fourth quarter of 2011, due primarily to the addition of 10 large commercial and industrial customers since January 2011. Two-percent growth in residential customers generated an additional $100,000 in gross margin for the Delmarva natural gas distribution operation.

On January 24, 2012, the FERC approved the rate case settlement for Eastern Shore. The settlement provides for a pre-tax return of 13.9 percent. The Company recorded $357,000 in additional gross margin in the fourth quarter of 2011 as a result of implementing new rates.

$776,000 in lower taxes other than income taxes, due to an accrual in the fourth quarter of 2010 for potential additional sales taxes and gross receipts taxes and the reversal of a portion of the accrual in the fourth quarter of 2011 as a result of the collection of those taxes from customers;

$412,000 in higher depreciation expense and asset removal costs from capital investments; and

$284,000 in decreased regulatory expenses as the Company incurred unusually high regulatory expenses during the fourth quarter of 2010 related to Eastern Shore’s rate case and the “Come-Back” filing in Florida.

(in thousands)

Gross margin for the three months ended December 31, 2010

Factors contributing to the gross margin decrease for the three months ended December 31, 2011:

Volume decrease - weather and other

Increase in retail margin per gallon

Propane wholesale marketing

Natural gas marketing

Miscellaneous fees and other

Gross margin for the three months ended December 31, 2011

Unseasonably warmer weather in the fourth quarter of 2011 on the Delmarva Peninsula and in Florida and a decrease in bulk deliveries, contributed to a $2.0 million decrease in gross margin, compared to the fourth quarter of 2010 for the propane distribution operations.

Gross margin increased by $351,000 in the fourth quarter of 2011, compared to the same quarter in 2010 due to higher margins per gallon as the Florida propane distribution operation continued to adjust its retail pricing in response to market conditions.

Operating Revenues

Regulated Energy

Unregulated Energy

Other

Total Operating Revenues

Operating Expenses

Regulated energy cost of sales

Unregulated energy and other cost of sales

Operations

Maintenance

Depreciation and amortization

Other taxes

Total operating expenses

Operating Income

Other income (loss), net of other expenses

Interest charges

Income Before Income Taxes

Income taxes

Net Income

Weighted Average Shares Outstanding:

Basic

Diluted

Earnings Per Share of Common Stock:

Basic

Diluted

Operating Revenues

(in thousands)

Residential

Commercial

Industrial

Other ⁽¹⁾

Total Operating Revenues

Volume (in Dts/MWHs)

Residential

Commercial

Industrial

Other

Total

Average Customers

Residential

Commercial

Industrial

Other

Total

Operating revenues from “Other” sources include unbilled revenue, under (over) recoveries of fuel cost, conservation revenue, other miscellaneous charges, fees for billing services provided to third parties and adjustments for pass-through taxes.

Operating Revenues (in thousands)

Residential

Commercial

Industrial

Other ⁽¹⁾

Total Operating Revenues

Volume (in Dts/MWHs)

Residential

Commercial

Industrial

Other

Total

Average Customers

Residential

Commercial

Industrial

Other

Total

Operating revenues from “Other” sources include unbilled revenue, under (over) recoveries of fuel cost, conservation revenue, other miscellaneous charges, fees for billing services provided to third parties and adjustments for pass-through taxes .

Assets

(in thousands, except shares and per share data)

Property, Plant and Equipment

Regulated energy

Unregulated energy

Other

Total property, plant and equipment

Less: Accumulated depreciation and amortization

Plus: Construction work in progress

Net property, plant and equipment

Current Assets

Cash and cash equivalents