<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>doc1.txt
<DESCRIPTION>CPK 2ND QTR FORM 10-Q
<TEXT>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                         _______________________________
                                    FORM 10-Q


[X]     QUARTERLY  REPORT  PURSUANT  TO  SECTION  13  OR 15(d) OF THE SECURITIES
        EXCHANGE  ACT  OF  1934

                 For the quarterly period ended:  June 30, 2004
                                                  -------------

                                       OR

[ ]     TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE  ACT  OF  1934

                 For the transition period from ______ to ______


                        COMMISSION FILE NUMBER: 001-11590


                        CHESAPEAKE UTILITIES CORPORATION
                        --------------------------------
             (Exact name of registrant as specified in its charter)


                      DELAWARE                 51-0064146
                      --------                 ----------
                 (State  or  other         (I.R.S.  Employer
                  jurisdiction  of        Identification  No.)
                   incorporation
                 or  organization)


                909 SILVER LAKE BOULEVARD, DOVER, DELAWARE 19904
                ------------------------------------------------
          (Address of principal executive offices, including Zip Code)


                                 (302) 734-6799
                                 --------------
              (Registrant's Telephone Number, including Area Code)


Indicate by check mark whether the registrant (1) has filed all reports required
to  be  filed  by  Section  13  or 15 (d) of the Securities Exchange Act of 1934
during  the  preceding 12 months (or for such shorter period that the registrant
was  required  to  file  such  reports), and (2) has been subject to such filing
requirements  for  the  past  90  days.  Yes  [X]  No  [ ]

Indicate  by  check  mark  whether  the  registrant  is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Exchange  Act).  Yes  [X]  No  [ ]

  Common Stock, par value $.4867 - 5,725,500 shares issued as of June 30. 2004.

<PAGE>

                                TABLE OF CONTENTS

PART  I  -  FINANCIAL  INFORMATION. . . . . . . . . . . . . . . . . . . . . . 1

  Item  1.     Financial  Statements. . . . . . . . . . . . . . . . . . . . . 1

    Notes  to  Condensed  Consolidated  Financial  Statements . . . . . . . . 7
      1.   Quarterly  Financial  Data . . . . . . . . . . . . . . . . . . . . 7
      2.   Calculation  of  Earnings  Per  Share. . . . . . . . . . . . . . . 9
      3.   Commitments  and  Contingencies. . . . . . . . . . . . . . . . . . 9
             Environmental  Matters . . . . . . . . . . . . . . . . . . . . . 9
             Other  Commitments  and  Contingencies . . . . . . . . . . . . .11
      4.   Recent  Authoritative  Pronouncements
           on  Financial  Reporting  and  Accounting. . . . . . . . . . . . .11
      5.   Segment  Information . . . . . . . . . . . . . . . . . . . . . . .12
      6.   Discontinued  Operations . . . . . . . . . . . . . . . . . . . . .13
      7.   Employee  Benefit  Plans . . . . . . . . . . . . . . . . . . . . .14

  Item  2.     Management's  Discussion  and  Analysis  of  Financial
               Condition  and  Results  of  Operations. . . . . . . . . . . .14

      Business  Description . . . . . . . . . . . . . . . . . . . . . . . . .14

    Financial  Position, Liquidity  and  Capital  Resources . . . . . . . . .15
      Off-Balance Sheet Arrangements and Contractual Obligations. . . . . . .16

    Results  of  Operations  for  the  Quarter
    Ended  June  30,  2004  . . . . . . . . . . . . . . . . . . . . . . . . .17
      Consolidated  Overview. . . . . . . . . . . . . . . . . . . . . . . . .17
      Natural  Gas  Distribution  and  Transmission . . . . . . . . . . . . .18
      Propane. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
      Advanced  Information  Services. . . . . . . . . . . . . . . . . . . . 19
      Other  Business  Operations  and  Eliminations . . . . . . . . . . . . 20
      Discontinued  Operations . . . . . . . . . . . . . . . . . . . . . . . 20
      Income  Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
      Interest  Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . 20

    Results  of  Operations  for  the  Six  Months
    Ended  June  30,  2004  . . . . . . . . . . . . . . . . . . . . . . . . .21
      Consolidated  Overview. . . . . . . . . . . . . . . . . . . . . . . . .21
      Natural  Gas  Distribution  and  Transmission . . . . . . . . . . . . .22
      Propane. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
      Advanced  Information  Services. . . . . . . . . . . . . . . . . . . . 23
      Other  Business  Operations  and  Eliminations . . . . . . . . . . . . 24
      Discontinued  Operations . . . . . . . . . . . . . . . . . . . . . . . 24
      Income  Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
      Interest  Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
      Environmental  Matters . . . . . . . . . . . . . . . . . . . . . . . . 24

    Other  Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
      Regulatory  Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 25
      Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
      Recent  Pronouncements . . . . . . . . . . . . . . . . . . . . . . . . 28
      Inflation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
      Cautionary  Statement. . . . . . . . . . . . . . . . . . . . . . . . . 29

  Item  3.     Quantitative and Qualitative Disclosures about Market Risk. . 29

  Item  4.     Controls  and  Procedures. . . . . . . . . . . . . . . . . . .30
      Evaluation  of  Disclosure  Controls  and  Procedures. . . . . . . . . 30
      Changes  in  Internal  Controls. . . . . . . . . . . . . . . . . . . . 30

PART  II  -  OTHER  INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 31

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

EXHIBIT  31.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

EXHIBIT  31.2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

EXHIBIT  32.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

EXHIBIT  32.2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37


                         PART I - FINANCIAL INFORMATION

ITEM  1.     FINANCIAL  STATEMENTS

 CHESAPEAKE  UTILITIES  CORPORATION  AND  SUBSIDIARIES

 CONDENSED  CONSOLIDATED  STATEMENTS  OF  INCOME  (UNAUDITED)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                                                                  2004           2003
 FOR THE THREE MONTHS ENDED JUNE 30,                                           RESTATED
-----------------------------------------------------------------------------------------
OPERATING REVENUES                                            $34,292,997    $30,784,922

OPERATING EXPENSES
<S>                                                           <C>           <C>
   Cost of sales, excluding costs below. . . . . . . . . . .   20,234,037     16,893,451
   Operations. . . . . . . . . . . . . . . . . . . . . . . .    8,634,728      7,772,767
   Maintenance . . . . . . . . . . . . . . . . . . . . . . .      415,567        431,112
   Depreciation and amortization . . . . . . . . . . . . . .    1,811,171      1,791,128
   Other taxes . . . . . . . . . . . . . . . . . . . . . . .    1,034,700      1,034,947
-----------------------------------------------------------------------------------------
 Total operating expenses. . . . . . . . . . . . . . . . . .   32,130,203     27,923,405
-----------------------------------------------------------------------------------------
 OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . .    2,162,794      2,861,517

 OTHER INCOME NET OF OTHER EXPENSES. . . . . . . . . . . . .       74,217         34,257

 INTEREST CHARGES. . . . . . . . . . . . . . . . . . . . . .    1,328,231      1,429,005
-----------------------------------------------------------------------------------------
 INCOME BEFORE INCOME TAXES. . . . . . . . . . . . . . . . .      908,780      1,466,769

 INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . .      297,262        532,233
-----------------------------------------------------------------------------------------
 INCOME FROM CONTINUING OPERATIONS . . . . . . . . . . . . .      611,518        934,536

 NET INCOME (LOSS) FROM DISCONTINUED
   OPERATIONS, NET OF TAX
   Discontinued operations, net of tax
     of $11,234 and ($2,899), respectively . . . . . . . . .       19,148        (71,961)
   Gain on sale. . . . . . . . . . . . . . . . . . . . . . .            -         71,574
-----------------------------------------------------------------------------------------
 Total income (loss) from discontinued operations, net . . .       19,148           (387)
-----------------------------------------------------------------------------------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . .  $   630,666   $    934,149
=========================================================================================

 EARNINGS PER SHARE OF COMMON STOCK:
   BASIC
     FROM CONTINUING OPERATIONS. . . . . . . . . . . . . . .  $      0.11   $       0.17
     FROM DISCONTINUED OPERATIONS. . . . . . . . . . . . . .         0.00           0.00
-----------------------------------------------------------------------------------------
   NET INCOME. . . . . . . . . . . . . . . . . . . . . . . .  $      0.11   $       0.17
=========================================================================================

   DILUTED
     FROM CONTINUING OPERATIONS. . . . . . . . . . . . . . .  $      0.11   $       0.17
     FROM DISCONTINUED OPERATIONS. . . . . . . . . . . . . .         0.00           0.00
-----------------------------------------------------------------------------------------
   NET INCOME. . . . . . . . . . . . . . . . . . . . . . . .  $      0.11   $       0.17
=========================================================================================

 CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK . . . . .  $     0.280   $      0.275
=========================================================================================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>

<PAGE>

 CHESAPEAKE  UTILITIES  CORPORATION  AND  SUBSIDIARIES

 CONDENSED  CONSOLIDATED  STATEMENTS  OF  INCOME  (UNAUDITED)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                                                                  2004           2003
 FOR THE SIX MONTHS ENDED JUNE 30,                                             RESTATED
-----------------------------------------------------------------------------------------
<S>                                                           <C>           <C>
 OPERATING REVENUES. . . . . . . . . . . . . . . . . . . . .  $98,055,357   $ 93,744,437

 OPERATING EXPENSES
   Cost of sales, excluding costs below. . . . . . . . . . .   60,638,245     55,317,606
   Operations. . . . . . . . . . . . . . . . . . . . . . . .   17,795,187     16,632,945
   Maintenance . . . . . . . . . . . . . . . . . . . . . . .      796,137        850,272
   Depreciation and amortization . . . . . . . . . . . . . .    3,621,795      3,527,227
   Other taxes . . . . . . . . . . . . . . . . . . . . . . .    2,341,893      2,243,691
-----------------------------------------------------------------------------------------
 Total operating expenses. . . . . . . . . . . . . . . . . .   85,193,257     78,571,741
-----------------------------------------------------------------------------------------
 OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . .   12,862,100     15,172,696

 OTHER INCOME NET OF OTHER EXPENSES. . . . . . . . . . . . .      176,694         88,157

 INTEREST CHARGES. . . . . . . . . . . . . . . . . . . . . .    2,654,997      2,894,855
-----------------------------------------------------------------------------------------
 INCOME BEFORE INCOME TAXES. . . . . . . . . . . . . . . . .   10,383,797     12,365,998

 INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . .    3,998,745      4,794,359
-----------------------------------------------------------------------------------------
 INCOME FROM CONTINUING OPERATIONS . . . . . . . . . . . . .    6,385,052      7,571,639

 NET INCOME (LOSS) FROM DISCONTINUED
   OPERATIONS, NET OF TAX
   Discontinued operations, net of tax
     of ($7,257) and ($87,619), respectively . . . . . . . .      (15,187)      (234,289)
   Gain on sale. . . . . . . . . . . . . . . . . . . . . . .            -         71,574
-----------------------------------------------------------------------------------------
 Total loss from discontinued operations, net. . . . . . . .      (15,187)      (162,715)
-----------------------------------------------------------------------------------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . .  $ 6,369,865   $  7,408,924
=========================================================================================

 EARNINGS PER SHARE OF COMMON STOCK:
   BASIC
     FROM CONTINUING OPERATIONS. . . . . . . . . . . . . . .  $      1.12   $       1.36
     FROM DISCONTINUED OPERATIONS. . . . . . . . . . . . . .         0.00          (0.03)
-----------------------------------------------------------------------------------------
   NET INCOME. . . . . . . . . . . . . . . . . . . . . . . .  $      1.12   $       1.33
=========================================================================================

   DILUTED
     FROM CONTINUING OPERATIONS. . . . . . . . . . . . . . .  $      1.10   $       1.33
     FROM DISCONTINUED OPERATIONS. . . . . . . . . . . . . .        (0.01)         (0.03)
-----------------------------------------------------------------------------------------
   NET INCOME. . . . . . . . . . . . . . . . . . . . . . . .  $      1.09   $       1.30
=========================================================================================

 CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK . . . . .  $     0.555   $      0.550
=========================================================================================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>

<PAGE>

 CHESAPEAKE  UTILITIES  CORPORATION  AND  SUBSIDIARIES

 CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS  (UNAUDITED)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                                                                  2004           2003
 FOR THE SIX MONTHS ENDED JUNE 30,                                             RESTATED
-----------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S>                                                           <C>           <C>
  Net Income . . . . . . . . . . . . . . . . . . . . . . . .  $ 6,369,865   $  7,408,924
  Adjustments to reconcile net income to net operating cash:
    Depreciation and amortization. . . . . . . . . . . . . .    3,621,795      3,980,473
    Depreciation and accretion included in other costs . . .    1,286,104      1,255,024
    Deferred income taxes, net . . . . . . . . . . . . . . .      822,082        957,212
    Mark-to-market adjustments . . . . . . . . . . . . . . .      140,089        604,430
    Employee benefits and compensation . . . . . . . . . . .      440,404        579,775
    Other. . . . . . . . . . . . . . . . . . . . . . . . . .      (14,620)        21,449
  Changes in assets and liabilities:
    Accounts receivable and accrued revenue. . . . . . . . .   10,773,033      8,125,498
    Inventory, materials, supplies and storage gas . . . . .     (648,888)     1,187,467
    Prepaid expenses and other current assets. . . . . . . .      221,095        427,248
    Other deferred charges . . . . . . . . . . . . . . . . .      303,234        346,101
    Accounts payable, net. . . . . . . . . . . . . . . . . .   (6,699,976)    (8,709,145)
    Refunds payable to customers . . . . . . . . . . . . . .      236,603       (165,282)
    Accrued income taxes . . . . . . . . . . . . . . . . . .    2,609,586      1,506,928
    Accrued interest . . . . . . . . . . . . . . . . . . . .    1,144,624      1,186,664
    Accrued compensation . . . . . . . . . . . . . . . . . .   (1,139,897)       299,966
    Over (under) recovered deferred purchased gas costs. . .      745,519     (2,808,638)
    Other current liabilities. . . . . . . . . . . . . . . .      456,922       (405,652)
    Other  liabilities . . . . . . . . . . . . . . . . . . .      (94,088)       201,446
-----------------------------------------------------------------------------------------
Net cash provided by operating activities. . . . . . . . . .   20,573,486     15,999,888
-----------------------------------------------------------------------------------------

INVESTING ACTIVITIES
  Property, plant and equipment expenditures, net. . . . . .   (6,582,168)    (4,607,407)
  Sale of discontinued operations. . . . . . . . . . . . . .       65,998        790,496
  Environmental recoveries, net of expenditures. . . . . . .      262,946        731,633
-----------------------------------------------------------------------------------------
Net cash used by investing activities. . . . . . . . . . . .   (6,253,224)    (3,085,278)
-----------------------------------------------------------------------------------------

FINANCING ACTIVITIES
  Common stock dividends . . . . . . . . . . . . . . . . . .   (3,125,798)    (3,055,339)
  Issuance of stock:
    Dividend Reinvestment Plan optional cash . . . . . . . .      102,483        166,486
    Dividends reinvested by stockholders . . . . . . . . . .      385,169        362,536
    Retirement Savings Plan. . . . . . . . . . . . . . . . .      588,794        574,632
    Conversion of debentures . . . . . . . . . . . . . . . .      205,663        113,834
  Purchase of treasury stock . . . . . . . . . . . . . . . .     (193,625)             -
  Net repayment under line of credit agreements. . . . . . .   (3,515,258)    (9,400,000)
  Repayment of long-term debt. . . . . . . . . . . . . . . .   (1,584,000)    (1,761,380)
-----------------------------------------------------------------------------------------
Net cash used by financing activities. . . . . . . . . . . .   (7,136,572)   (12,999,231)
-----------------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . .    7,183,690        (84,621)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD. . . . . . . .    3,108,501      2,458,276
-----------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS END OF PERIOD. . . . . . . . . . .  $10,292,191   $  2,373,655
=========================================================================================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>

<PAGE>

 CHESAPEAKE  UTILITIES  CORPORATION  AND  SUBSIDIARIES

 CONDENSED  CONSOLIDATED  BALANCE  SHEETS  (UNAUDITED)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                                                               JUNE 30,      DECEMBER 31,
 ASSETS                                                          2004            2003
-----------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
<S>                                                          <C>            <C>
   Natural gas distribution and transmission. . . . . . . .  $189,999,737   $186,661,469
   Propane. . . . . . . . . . . . . . . . . . . . . . . . .    36,843,142     35,577,104
   Advanced information services. . . . . . . . . . . . . .     1,431,674      1,396,595
   Water services . . . . . . . . . . . . . . . . . . . . .       750,947        762,383
   Other plant. . . . . . . . . . . . . . . . . . . . . . .     8,840,050      8,796,305
-----------------------------------------------------------------------------------------
 Total property, plant and equipment. . . . . . . . . . . .   237,865,550    233,193,856
 Plus:  Construction work in progress . . . . . . . . . . .     2,224,284      1,724,721
 Less:  Accumulated depreciation and amortization . . . . .   (69,873,829)   (67,046,318)
-----------------------------------------------------------------------------------------
 Net property, plant and equipment. . . . . . . . . . . . .   170,216,005    167,872,259
-----------------------------------------------------------------------------------------

 INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . .       341,602        386,710
-----------------------------------------------------------------------------------------

 CURRENT ASSETS
   Cash and cash equivalents. . . . . . . . . . . . . . . .    10,292,191      3,108,501
   Accounts receivable (less allowance for uncollectibles
     of $698,078 and $659,047, respectively). . . . . . . .    18,577,898     26,191,845
   Accrued revenue. . . . . . . . . . . . . . . . . . . . .     1,272,668      4,497,752
   Materials and supplies, at average cost. . . . . . . . .       987,460        923,556
   Appliance and other inventory, at FIFO . . . . . . . . .       143,106        173,044
   Propane inventory, at average cost . . . . . . . . . . .     5,222,715      3,387,535
   Storage gas prepayments. . . . . . . . . . . . . . . . .     3,402,343      4,622,601
   Underrecovered purchased gas costs . . . . . . . . . . .             -        660,601
   Income taxes receivable. . . . . . . . . . . . . . . . .             -        489,841
   Deferred income taxes receivable . . . . . . . . . . . .        79,685              -
   Prepaid expenses . . . . . . . . . . . . . . . . . . . .     1,763,805      2,069,988
   Other current assets . . . . . . . . . . . . . . . . . .       713,957        768,958
-----------------------------------------------------------------------------------------
 Total current assets . . . . . . . . . . . . . . . . . . .    42,455,828     46,894,222
-----------------------------------------------------------------------------------------

 DEFERRED CHARGES AND OTHER ASSETS
   Environmental regulatory assets. . . . . . . . . . . . .       316,414        353,092
   Environmental expenditures . . . . . . . . . . . . . . .       101,142        364,088
   Goodwill, net. . . . . . . . . . . . . . . . . . . . . .       674,451        674,451
   Other intangible assets, net . . . . . . . . . . . . . .       297,597        305,213
   Long-term receivables. . . . . . . . . . . . . . . . . .     1,543,811      1,637,998
   Other regulatory assets. . . . . . . . . . . . . . . . .     1,408,683      1,693,401
   Other deferred charges . . . . . . . . . . . . . . . . .     1,011,032        983,230
-----------------------------------------------------------------------------------------
 Total deferred charges and other assets. . . . . . . . . .     5,353,130      6,011,473
-----------------------------------------------------------------------------------------



 TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . .  $218,366,565   $221,164,664
=========================================================================================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>

<PAGE>

 CHESAPEAKE  UTILITIES  CORPORATION  AND  SUBSIDIARIES

 CONDENSED  CONSOLIDATED  BALANCE  SHEETS  (UNAUDITED)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                                                               JUNE 30,      DECEMBER 31,
 CAPITALIZATION AND LIABILITIES                                  2004            2003
-----------------------------------------------------------------------------------------
 CAPITALIZATION
   Stockholders' equity
     Common Stock, par value $.4867 per share;
     (authorized 12,000,000 shares; issued and outstanding
<S>                                                          <C>            <C>
      5,734,853 and 5,660,594 shares, respectively) . . . .  $  2,790,720   $  2,754,748
     Additional paid-in capital . . . . . . . . . . . . . .    35,856,549     34,176,361
     Retained earnings. . . . . . . . . . . . . . . . . . .    39,186,041     36,008,246
     Treasury stock . . . . . . . . . . . . . . . . . . . .      (193,625)             -
-----------------------------------------------------------------------------------------
   Total stockholders' equity . . . . . . . . . . . . . . .    77,639,685     72,939,355

   Long-term debt, net of current maturities. . . . . . . .    68,209,546     69,415,545
-----------------------------------------------------------------------------------------
   Total capitalization . . . . . . . . . . . . . . . . . .   145,849,231    142,354,900
-----------------------------------------------------------------------------------------

 CURRENT LIABILITIES
   Current portion of long-term debt. . . . . . . . . . . .     3,287,091      3,665,091
   Short-term borrowing . . . . . . . . . . . . . . . . . .             -      3,515,258
   Accounts payable . . . . . . . . . . . . . . . . . . . .    15,297,436     21,997,413
   Refunds payable to customers . . . . . . . . . . . . . .       443,185        206,582
   Customer deposits. . . . . . . . . . . . . . . . . . . .     1,969,981      2,008,379
   Income taxes payable . . . . . . . . . . . . . . . . . .     2,119,745              -
   Accrued interest . . . . . . . . . . . . . . . . . . . .     1,796,991        652,367
   Dividends payable. . . . . . . . . . . . . . . . . . . .     1,604,427      1,556,631
   Overrecovered purchased gas costs. . . . . . . . . . . .        84,918              -
   Deferred income taxes payable. . . . . . . . . . . . . .             -        119,814
   Accrued compensation . . . . . . . . . . . . . . . . . .     1,921,388      3,266,072
   Other accrued liabilities. . . . . . . . . . . . . . . .     2,152,843      1,657,523
-----------------------------------------------------------------------------------------
 Total current liabilities. . . . . . . . . . . . . . . . .    30,678,005     38,645,130
-----------------------------------------------------------------------------------------

 DEFERRED CREDITS AND OTHER LIABILITIES
   Deferred income taxes. . . . . . . . . . . . . . . . . .    20,612,576     19,590,995
   Deferred investment tax credits. . . . . . . . . . . . .       465,317        492,725
   Environmental liabilities. . . . . . . . . . . . . . . .       508,910        562,194
   Accrued pension costs. . . . . . . . . . . . . . . . . .     2,226,268      2,015,128
   Accrued asset removal cost . . . . . . . . . . . . . . .    14,198,070     13,536,209
   Other liabilities. . . . . . . . . . . . . . . . . . . .     3,828,188      3,967,383
-----------------------------------------------------------------------------------------
 Total deferred credits and other liabilities . . . . . . .    41,839,329     40,164,634
-----------------------------------------------------------------------------------------

 COMMITMENTS AND CONTINGENCIES (NOTE 3)



 TOTAL CAPITALIZATION AND LIABILITIES . . . . . . . . . . .  $218,366,565   $221,164,664
=========================================================================================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>

<PAGE>








                       This page intentionally left blank.







<PAGE>
NOTES  TO  CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS

1.     QUARTERLY  FINANCIAL  DATA

The financial information for Chesapeake Utilities Corporation (the "Company" or
"Chesapeake")  included  herein  is  unaudited and should be read in conjunction
with  the  Company's  Annual  Report on Form 10-K; however, the year-end balance
sheet data has been derived from audited financial statements. In the opinion of
management,  this  financial  information  reflects normal recurring adjustments
which are necessary for a fair presentation of the Company's interim results. In
accordance  with  United  States  Generally  Accepted Accounting Principles, the
Company's  management  makes  certain  estimates  and  assumptions regarding: 1)
reported  amounts  of assets and liabilities, 2) disclosure of contingent assets
and  liabilities at the date of the financial statements and 3) reported amounts
of  revenues  and  expenses  during  the  reporting period. Actual results could
differ  from  those  estimates.  Due  to  the  seasonal  nature of the Company's
business, there are substantial variations in the results of operations reported
on  a  quarterly  basis and, accordingly, results for any particular quarter may
not  give  a  true  indication  of  results  for  the  year.

Chesapeake  does  not  have any material components of comprehensive income that
are  required  to  be  reported by Financial Accounting Standards Board ("FASB")
Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  130,  "Reporting
Comprehensive  Income."

<PAGE>

As  reported  on the Company's December 31, 2003 Annual Report on Form 10-K, the
Company  has  restated  its  quarterly financial statements for prior periods in
order  to reflect the results of its Delaware and Maryland natural gas divisions
on  the "accrual" revenue recognition method rather than the "as billed" revenue
recognition  method.  This  change  had an insignificant effect on the Company's
annual  results  for  2003. Under the "as billed" method, revenues from customer
sales are not recognized until the meter is read. Under the "accrual" method, at
the end of each period, the amount of gas used is estimated and is recognized as
revenue.  The  Company's  Florida  division  has historically used the "accrual"
method  in accordance with Florida Public Service Commission requirements. Prior
to  December  31, 2003, the Delaware and Maryland divisions used the "as billed"
method to recognize revenues consistent with the rate-setting processes in those
states.  In  order  to  consistently apply the "accrual" method, the Company met
separately  with  the  staffs  of  the  Delaware  and  Maryland  Public  Service
Commissions  to determine the regulatory impact of the change. Having determined
that  there  is  little  to  no regulatory impact, the Company has conformed the
revenue  recognition  method  used in its Delaware and Maryland divisions to the
method used by its Florida division. In order to provide comparable information,
the  Company  has  restated  its  2003 quarterly interim financial statements to
reflect  the  "accrual"  revenue  recognition  method.  Dollars  are  shown  in
thousands,  except  per  share  amounts.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                           ----------  THREE MONTHS ENDED  ---------- -----------  SIX MONTHS ENDED  -----------
                                             JUNE 30,       IMPACT OF      JUNE 30,     JUNE 30,       IMPACT OF      JUNE 30,
                                               2003          REVENUE         2003         2003          REVENUE         2003
                                           AS PREVIOUSLY   RECOGNITION                AS PREVIOUSLY   RECOGNITION
                                            REPORTED (1)     CHANGE       AS RESTATED  REPORTED (1)     CHANGE       AS RESTATED
--------------------------------------------------------------------------------------------------------------------------------
SELECTED INCOME STATEMENT INFORMATION
<S>                                         <C>           <C>            <C>           <C>           <C>            <C>
  Operating Revenues . . . . . . . . . . .  $     32,237  $     (1,452)  $     30,785  $     96,160  $     (2,416)  $     93,744
  Operating Income . . . . . . . . . . . .         3,268          (406)         2,862        15,835          (662)        15,173
  Income from Continuing Operations. . . .         1,177          (242)           935         7,967          (395)         7,572
  Net Income . . . . . . . . . . . . . . .         1,176          (242)           934         7,804          (395)         7,409

EARNINGS PER SHARE OF COMMON STOCK
Basic
  From Continuing Operations . . . . . . .  $       0.21  $      (0.04)  $      0.17  $       1.43  $      (0.07)  $       1.36
  Net Income . . . . . . . . . . . . . . .  $       0.21  $      (0.04)  $      0.17  $       1.40  $      (0.07)  $       1.33

Diluted
  From Continuing Operations . . . . . . .  $       0.21  $      (0.04)  $       0.17  $       1.40  $      (0.07)  $       1.33
  Net Income . . . . . . . . . . . . . . .  $       0.21  $      (0.04)  $       0.17  $       1.37  $      (0.07)  $       1.30
</TABLE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
                                             JUNE 30,       IMPACT OF      JUNE 30,
                                               2003          REVENUE         2003
                                           AS PREVIOUSLY   RECOGNITION
                                            REPORTED (1)     CHANGE       AS RESTATED
--------------------------------------------------------------------------------------
Assets
<S>                                         <C>           <C>            <C>
  Accounts receivable and accrued revenue.  $     18,337  $        881   $     19,218
  Unrecovered purchased gas costs. . . . .         4,023          (451)         3,572
  Deferred income taxes. . . . . . . . . .         1,465          (467)           998
  Other regulatory assets. . . . . . . . .         2,118             9          2,127

Liabilities
  Income taxes . . . . . . . . . . . . . .         1,285          (293)           992

Stockholders' Equity
  Retained earnings. . . . . . . . . . . .  $     36,967  $        265   $     37,232

<FN>
(1)  Operating Revenue, Operating Income and Income from Continuing Operations
     exclude the results of the operations discontinued in 2003 and include
     minor reclassifications to conform with the presentation of the 2004
     results.
</FN>
</TABLE>

<PAGE>

2.     CALCULATION  OF  EARNINGS  PER  SHARE

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                                    THREE MONTHS ENDED       SIX MONTHS ENDED
                                                     2004        2003        2004        2003
 FOR THE PERIOD ENDED JUNE 30,                                 RESTATED                RESTATED
------------------------------------------------------------------------------------------------
CALCULATION OF BASIC EARNINGS PER SHARE FROM
CONTINUING OPERATIONS:
<S>                                               <C>         <C>         <C>         <C>
     Net income from continuing operations . . .  $  611,518  $  934,536  $6,385,052  $7,571,639
     Weighted average shares outstanding . . . .   5,728,158   5,599,525   5,708,294   5,580,620
------------------------------------------------------------------------------------------------
 BASIC EARNINGS PER SHARE FROM
   CONTINUING OPERATIONS . . . . . . . . . . . .  $     0.11  $     0.17  $     1.12  $     1.36
================================================================================================


 CALCULATION OF DILUTED EARNINGS PER SHARE FROM
   CONTINUING OPERATIONS:
  RECONCILIATION OF NUMERATOR:
     Net Income from continuing operations Basic  $  611,518  $  934,536  $6,385,052  $7,571,639
     Effect of 8.25% Convertible debentures *. .           -           -      70,421      80,457
------------------------------------------------------------------------------------------------
   Adjusted numerator Diluted. . . . . . . . . .  $  611,518  $  934,536  $6,455,473  $7,652,096
------------------------------------------------------------------------------------------------

  RECONCILIATION OF DENOMINATOR:
     Weighted shares outstanding Basic . . . . .   5,728,158   5,599,525   5,708,294   5,580,620
     Effect of dilutive securities *
       Stock options . . . . . . . . . . . . . .       2,369         852       3,414           -
       Warrants. . . . . . . . . . . . . . . . .       6,492       4,359       7,682       3,016
       8.25% Convertible debentures. . . . . . .           -           -     165,867     190,027
------------------------------------------------------------------------------------------------
   Adjusted denominator Diluted. . . . . . . . .   5,737,019   5,604,736   5,885,257   5,773,663
------------------------------------------------------------------------------------------------

 DILUTED EARNINGS PER SHARE FROM
   CONTINUING OPERATIONS . . . . . . . . . . . .  $     0.11  $     0.17  $     1.10  $     1.33
================================================================================================
<FN>
*    Amounts associated with securities resulting in an anti-dilutive effect on
     earnings per share are not included in this calculation.
 </FN>
</TABLE>

3.     COMMITMENTS  AND  CONTINGENCIES

ENVIRONMENTAL  MATTERS
In  2003,  Chesapeake  completed  its responsibilities related to one former gas
manufacturing  plant  site  and is currently participating in the investigation,
assessment  or  remediation  of  two other former gas manufacturing plant sites.
These  sites  are  located  in  three  different  jurisdictions. The Company has
accrued  liabilities for these three sites referred to respectively as the Dover
Gas  Light,  Salisbury  Town  Gas Light and the Winter Haven Coal Gas sites. The
Company  is  currently  in  discussions  with  the  Maryland  Department  of the
Environment  ("MDE") regarding the possible responsibilities of the Company with
respect  to a fourth former gas manufacturing plant site in Cambridge, Maryland.

Dover  Gas  Light  Site
-----------------------
The  Dover  Gas  Light  site  is a former manufactured gas plant site located in
Dover,  Delaware.  On  January  15,  2004, the Company received a Certificate of
Completion  of  Work  from  the  United  States  Environmental Protection Agency
("EPA")  regarding  this  site.  This  concluded  Chesapeake's  remedial  action
obligation  related  to  this  site  and  relieves Chesapeake from liability for
future  remediation  at  the  site,  unless  previously  unknown  conditions are
discovered at the site, or information previously unknown to the EPA is received
that  indicates  the  remedial  action  that  has been taken is not sufficiently
protective.  These  contingencies  are  standard  and are required by the United
States  in  all  liability  settlements.

At  June 30, 2004, the Company had accrued $10,000 for costs associated with the
Dover  Gas  Light  site  and had recorded an associated regulatory asset for the
same  amount. Through June 30, 2004, the Company has incurred approximately $9.7
million  in  costs relating to environmental testing and remedial action studies
at  the  site.  Approximately  $9.6 million has been recovered through June 2004
from  other  parties  or  through  rates.

Salisbury  Town  Gas  Light  Site
---------------------------------
In  cooperation  with  the  MDE,  the Company has completed an assessment of the
Salisbury  manufactured  gas  plant  site, located in Salisbury, Maryland, which
determined that there was localized ground-water contamination. During 1996, the
Company  completed construction and began Air Sparging and Soil-Vapor Extraction
("AS/SVE") remediation procedures. Chesapeake has been reporting the remediation
and  monitoring  results  to the MDE on an ongoing basis since 1996. In February
2002,  the  MDE granted permission to permanently decommission the AS/SVE system
and to discontinue all on-site and off-site well monitoring, except for one well
that  is  being  maintained  for  continued  product monitoring and recovery. In
November  2002,  Chesapeake  submitted a letter to the MDE requesting No Further
Action  ("NFA")  determination.  In  December 2002, the MDE recommended that the
Company  submit work plans to MDE and place deed restrictions on the property as
conditions  prior  to  receiving  an  NFA.  The  Company  has  completed the MDE
recommended  work plans and has executed the deed restrictions. During the third
quarter of 2003 the Company submitted a revised request for the NFA. The MDE has
not  yet  responded  to  the  request.

The  Company  has  adjusted the liability with respect to the Salisbury Town Gas
Light  site  to  $7,000  at June 30, 2004. This amount is based on the estimated
costs  to  perform  limited  product monitoring and recovery efforts and fulfill
ongoing  reporting  requirements.  A  corresponding  regulatory  asset  has been
recorded,  reflecting  the  Company's  belief  that  costs  incurred  will  be
recoverable  in  base  rates.

Through  June  30, 2004, the Company has incurred approximately $2.9 million for
remedial actions and environmental studies at the Salisbury Town Gas Light site.
Of  this amount, approximately $1.8 million has been recovered through insurance
proceeds or in rates. The Company expects to recover the remaining costs through
rates.

Winter  Haven  Coal  Gas  Site
------------------------------
The  Winter  Haven Coal Gas site is located in Winter Haven, Florida. Chesapeake
has  been  working  with  the  Florida  Department  of  Environmental Protection
("FDEP")  in assessing this coal gas site. In May 1996, the Company filed an Air
Sparging  and  Soil Vapor Extraction Pilot Study Work Plan (the "Work Plan") for
the  Winter  Haven  site  with  the  FDEP. The Work Plan described the Company's
proposal  to  undertake  an  AS/SVE  pilot  study  to  evaluate  the site. After
discussions  with the FDEP, the Company filed a modified AS/SVE Pilot Study Work
Plan,  the  description  of  the  scope  of work to complete the site assessment
activities and a report describing a limited sediment investigation performed in
1997.  In  December  1998,  the  FDEP approved the AS/SVE Pilot Study Work Plan,
which  the Company completed during the third quarter of 1999. In February 2001,
the  Company  filed  a Remedial Action Plan ("RAP") with the FDEP to address the
contamination  of the subsurface soil and ground-water in a portion of the site.
The  FDEP approved the RAP on May 4, 2001. Construction of the AS/SVE system was
completed in the fourth quarter of 2002 and the system is now fully operational.

FDEP has indicated that the Company may be required to remediate sediments along
the shoreline of Lake Shipp, immediately west of the Winter Haven site. Based on
studies  performed  to  date,  the Company objects to FDEP's suggestion that the
sediments have been contaminated and require remediation. Early estimates by the
Company's environmental consultant indicate that some of the corrective measures
discussed by FDEP may cost as much as $1 million. Given the Company's view as to
the  absence  of ecological effects, the Company believes that cost expenditures
of  this  magnitude  are  unwarranted  and  plans  to  vigorously  oppose  any
requirements  that  it  undertake corrective measures in the offshore sediments.
Chesapeake  anticipates  that  it  will  be  several  years before this issue is
resolved.  At  this  time, the Company has not recorded a liability for sediment
remediation.  The  outcome  of  this  matter  cannot  be predicted at this time.

The  Company  has  accrued  a  liability of $492,000 as of June 30, 2004 for the
Florida site. Through June 30, 2004, the Company has incurred approximately $1.3
million  of  environmental  costs  associated with the Florida site. At June 30,
2004  the  Company  had  collected  through  rates  $193,000  in excess of costs
incurred.  A  regulatory  asset  of  approximately  $299,000,  representing  the
uncollected portion of the estimated clean-up costs, has also been recorded. The
Company  expects  to  recover  the  remaining  costs  through  rates.

Other
-----
The  Company  is  in  discussions  with  the  MDE  regarding  the  possible
responsibilities  of  the  Company for remediation of a fourth gas manufacturing
plant  site located in Cambridge, Maryland. The outcome of this matter cannot be
determined  at  this  time.

OTHER  COMMITMENTS  AND  CONTINGENCIES
The  Company's natural gas and propane distribution operations have entered into
contractual  commitments  to  purchase gas from various suppliers. The contracts
have  various  expiration  dates.  In  November 2003, the Company entered into a
one-year contract with an energy marketing and risk management company to manage
a  portion  of  the  Company's  natural gas transportation and storage capacity.

The  Company  has  issued corporate guarantees to certain vendors of its propane
wholesale marketing subsidiary. The corporate guarantees provide for the payment
of  propane  purchases  by  the  subsidiary,  in  the  event of the subsidiary's
default.  The aggregate amount guaranteed at June 30, 2004 totaled $4.5 million,
with  the  guarantees  expiring  on  various  dates  through  February  2005.

The  Company  has issued a letter of credit to its primary insurance company for
$694,000,  which  expires  June  1,  2005.

The  Company  is  involved  in  certain  legal actions and claims arising in the
normal  course  of  business.  The Company is also involved in certain legal and
administrative  proceedings  before  various  governmental  agencies  concerning
rates.  In  the  opinion  of  management,  the  ultimate  disposition  of  these
proceedings  and  claims  will  not  have  a material effect on the consolidated
financial  position,  results  of  operations  or  cash  flows  of  the Company.

Certain  assets  and  liabilities of the Company are accounted for in accordance
with  SFAS  No. 71. SFAS No. 71 provides guidance for public utilities and other
regulated  operations  where the rates (prices) charged to customers are subject
to  regulatory  review  and  approval.  Regulators  sometimes  include  costs in
allowable  costs  in  a period other than the period in which the costs would be
charged  to  expense  by  an  unregulated  enterprise. That procedure can create
assets,  reduce  assets, or create liabilities for the regulated enterprise. For
general-purpose  financial  reporting,  an  incurred  cost for which a regulator
permits  recovery in a future period is accounted for like an incurred cost that
is  reimbursable  under  a cost-reimbursement-type contract. If the Company were
required  to  terminate  the  application  of  SFAS  No.  71  to  its  regulated
operations,  all  such  deferred  amounts  would  be  recognized  in  the income
statement  at  that  time.  This  would  result  in a charge to earnings, net of
applicable  income  taxes,  in  an  amount  which  could  be  material.

4.     RECENT AUTHORITATIVE PRONOUNCEMENTS ON FINANCIAL REPORTING AND ACCOUNTING

On  January  12,  2004,  the  FASB  released  FASB Staff Position No. SFAS 106-1
"Accounting  and  Disclosure  Requirements  Related to the Medicare Prescription
Drug,  Improvement  and Modernization Act of 2003" (the "Act"). On May 19, 2004,
the  FASB  released  FASB  Staff  Position  No. SFAS 106-2 which superseded SFAS
106-1. SFAS No. 106-2 provides guidance on the accounting for the effects of the
Act and requires certain disclosures regarding the effect of the federal subsidy
provided  by  the  Act.  It  is effective for the first interim or annual period
beginning  after  June  15,  2004. Adoption of SFAS No. 106-2 is not expected to
have  a  material  impact  on  the Company's post-retirement benefit obligation.

The  Emerging  Issues  Task  Force  ("EITF") of the FASB issued EITF No. 03-6 on
February 9, 2004. It requires that earnings used to calculate earnings per share
be  allocated  between common shareholders and other securities holders based on
their respective rights to receive dividends. This requirement was effective for
the  second  quarter  of  2004. It had no impact on the Company's calculation of
earnings  per  share.

5.     SEGMENT  INFORMATION

Chesapeake  uses  the  management  approach  to  identify  operating  segments.
Chesapeake organizes its business around differences in products or services and
the  operating  results  of each segment are regularly reviewed by the Company's
chief operating decision maker in order to make decisions about resources and to
assess performance. The following table presents information about the Company's
reportable  segments.  Results  exclude  discontinued  operations.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                                       THREE MONTHS ENDED             SIX MONTHS ENDED
                                                       2004           2003           2004          2003
FOR THE PERIOD ENDED JUNE 30,                                       RESTATED                     RESTATED
------------------------------------------------------------------------------------------------------------
OPERATING REVENUES, UNAFFILIATED CUSTOMERS
<S>                                                <C>            <C>            <C>           <C>
  Natural gas distribution and transmission . . .  $ 25,101,267   $ 22,064,115   $ 67,402,252  $ 61,545,956
  Propane . . . . . . . . . . . . . . . . . . . .     5,754,405      5,537,407     24,214,662    25,784,434
  Advanced information services . . . . . . . . .     3,437,325      3,185,153      6,438,443     6,418,571
  Other . . . . . . . . . . . . . . . . . . . . .             -         (1,753)             -        (4,524)
------------------------------------------------------------------------------------------------------------
Total operating revenues, unaffiliated customers.  $ 34,292,997   $ 30,784,922   $ 98,055,357  $ 93,744,437
============================================================================================================

INTERSEGMENT REVENUES (1)
  Natural gas distribution and transmission . . .  $     35,004   $     61,727   $     95,991  $    101,766
  Advanced information services . . . . . . . . .        13,570         30,190         22,587        68,024
  Other . . . . . . . . . . . . . . . . . . . . .       168,686        176,903        338,132       357,094
------------------------------------------------------------------------------------------------------------
Total intersegment revenues . . . . . . . . . . .  $    217,260   $    268,820   $    456,710  $    526,884
============================================================================================================

OPERATING INCOME
  Natural gas distribution and transmission . . .  $  2,696,914   $  2,993,220   $  9,914,667  $ 10,273,874
  Propane . . . . . . . . . . . . . . . . . . . .      (881,576)      (390,032)     2,440,082     4,495,450
  Advanced information services . . . . . . . . .       259,750        164,301        331,835       226,634
  Other . . . . . . . . . . . . . . . . . . . . .        87,706         94,028        175,516       176,738
------------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . .  $  2,162,794   $  2,861,517   $ 12,862,100  $ 15,172,696
============================================================================================================
<FN>
(1)  All significant intersegment revenues are billed at market rates and have
     been.
</FN>
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                     JUNE 30,     DECEMBER 31,
                                                       2004           2003
-------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
<S>                                                <C>            <C>
  Natural gas distribution and transmission . . .  $158,763,569   $169,865,930
  Propane . . . . . . . . . . . . . . . . . . . .    38,659,073     38,359,251
  Advanced information services . . . . . . . . .     2,912,282      2,912,733
  Other . . . . . . . . . . . . . . . . . . . . .    17,080,992      7,791,796
-------------------------------------------------------------------------------
Total identifiable assets . . . . . . . . . . . .  $217,415,916   $218,929,710
===============================================================================
</TABLE>

The  Company's  operations  are  all domestic. The advanced information services
segment has infrequent transactions with foreign companies, located primarily in
Canada,  that  are  denominated and paid in U.S. dollars. These transactions are
immaterial  to  the  consolidated  revenues.

<PAGE>
6.     DISCONTINUED  OPERATIONS

The  following  table  presents  the  balance  sheet  accounts  for discontinued
operations.

 CHESAPEAKE  UTILITIES  CORPORATION  DISCONTINUED  OPERATIONS

 BALANCE  SHEETS  (UNAUDITED)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                                                               JUNE 30,      DECEMBER 31,
 ASSETS                                                          2004            2003
-----------------------------------------------------------------------------------------
 PROPERTY, PLANT AND EQUIPMENT
<S>                                                          <C>            <C>
   Property, plant and equipment. . . . . . . . . . . . . .  $    750,947   $    762,383
   Less:  Accumulated depreciation and amortization . . . .      (319,127)      (326,792)
-----------------------------------------------------------------------------------------
 Net property, plant and equipment. . . . . . . . . . . . .       431,820        435,591
-----------------------------------------------------------------------------------------

 CURRENT ASSETS
   Cash and cash equivalents. . . . . . . . . . . . . . . .        19,903      1,437,821
   Accounts receivable (less allowance for uncollectibles
     of $1,619 and $5,346, respectively). . . . . . . . . .       217,184        273,799
   Appliance and other inventory, at FIFO . . . . . . . . .        95,594         99,839
   Income taxes receivable. . . . . . . . . . . . . . . . .             -              -
   Deferred income taxes receivable . . . . . . . . . . . .        20,725         20,725
   Prepaid expenses . . . . . . . . . . . . . . . . . . . .        95,405        110,175
-----------------------------------------------------------------------------------------
 Total current assets . . . . . . . . . . . . . . . . . . .       448,811      1,942,359
-----------------------------------------------------------------------------------------

 DEFERRED CHARGES AND OTHER ASSETS
   Other intangible assets, net . . . . . . . . . . . . . .        70,018         70,018
   Deferred income taxes receivable . . . . . . . . . . . .       125,369        150,847
-----------------------------------------------------------------------------------------
 Total deferred charges and other assets. . . . . . . . . .       195,387        220,865
-----------------------------------------------------------------------------------------

 TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . .  $  1,076,018   $  2,598,815
=========================================================================================


 STOCKHOLDERS' EQUITY AND LIABILITIES
-------------------------------------------------------------------------------------
 STOCKHOLDERS' EQUITY
   Common Stock . . . . . . . . . . . . . . . . . . . . . .  $     51,010   $     51,010
   Additional paid-in capital . . . . . . . . . . . . . . .     3,914,783      3,914,783
   Retained deficits. . . . . . . . . . . . . . . . . . . .    (6,386,352)    (5,271,164)
-----------------------------------------------------------------------------------------
 Total stockholders' equity . . . . . . . . . . . . . . . .    (2,420,559)    (1,305,371)
-----------------------------------------------------------------------------------------

 CURRENT LIABILITIES
   Accounts payable . . . . . . . . . . . . . . . . . . . .        16,684         67,303
   Due to parent company. . . . . . . . . . . . . . . . . .     3,252,016      3,558,434
   Customer deposits. . . . . . . . . . . . . . . . . . . .         9,342         11,403
   Income taxes payable . . . . . . . . . . . . . . . . . .       159,556        192,290
   Other accrued liabilities. . . . . . . . . . . . . . . .        58,979         74,756
-----------------------------------------------------------------------------------------
 Total current liabilities. . . . . . . . . . . . . . . . .     3,496,577      3,904,186
-----------------------------------------------------------------------------------------

 TOTAL STOCKHOLDERS' EQUITY AND LIABILITIES . . . . . . . .  $  1,076,018   $  2,598,815
=========================================================================================
</TABLE>

During  2003,  the  Company  sold  the assets of six of its seven water services
businesses.  The  Company expects to dispose of the remaining operation, located
in Stuart, Florida, during 2004. The assets are recorded at their estimated fair
value.  Results  for all the water dealerships were reclassified to discontinued
operations  in  accordance  with SFAS No. 144, "Accounting for the Impairment or
Disposal  of  Long-Lived Assets." The results of the water companies' operations
for  all  periods  presented  in  the  consolidated  income statements have been
reclassified  to  discontinued  operations  and  shown  net  of  tax.

7.     EMPLOYEE  BENEFIT  PLANS

Net  periodic  benefit costs for the defined benefit pension plan, the executive
excess  benefit  plan  and  other  post-retirement  benefits  are  shown  below:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                                                                      OTHER
                                         DEFINED BENEFIT     EXECUTIVE EXCESS    POST-RETIREMENT
                                           PENSION PLAN        BENEFIT PLAN        BENEFITS
FOR THE THREE MONTHS ENDED JUNE 30,      2004        2003      2004     2003     2004     2003
------------------------------------------------------------------------------------------------
<S>                                   <C>         <C>         <C>      <C>      <C>      <C>
Service Cost . . . . . . . . . . . .  $  84,690   $  81,341   $23,851  $26,970  $ 1,315  $ 1,284
Interest Cost. . . . . . . . . . . .    176,727     171,060    20,597   20,010   22,042   21,330
Expected return on plan assets . . .   (235,889)   (196,119)        -        -        -        -
Amortization of transition amount. .     (3,776)     (3,776)        -        -    6,965    6,965
Amortization of prior service cost .     (1,175)     (1,175)      697      697        -        -
Amortization of net (gain) loss. . .          -           -     4,479    4,670   (3,752)  16,568
------------------------------------------------------------------------------------------------
Net periodic benefit cost. . . . . .  $  20,577   $  51,331   $49,624  $52,347  $26,570  $46,147
================================================================================================
</TABLE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                                                                        OTHER
                                         DEFINED BENEFIT       EXECUTIVE EXCESS    POST-RETIREMENT
                                           PENSION PLAN          BENEFIT PLAN         BENEFITS
FOR THE SIX MONTHS ENDED JUNE 30,        2004        2003       2004      2003      2004     2003
--------------------------------------------------------------------------------------------------
<S>                                   <C>         <C>         <C>       <C>       <C>      <C>
Service Cost . . . . . . . . . . . .  $ 169,379   $ 162,683   $ 52,438  $ 53,939  $ 2,677  $ 2,569
Interest Cost. . . . . . . . . . . .    353,454     342,120     41,502    40,020   43,442   42,660
Expected return on plan assets . . .   (471,778)   (392,238)         -         -        -        -
Amortization of transition amount. .     (7,552)     (7,552)         -         -   13,930   13,930
Amortization of prior service cost .     (2,350)     (2,350)     1,394     1,394        -        -
Amortization of net (gain) loss. . .          -           -      8,274     9,339   39,450   33,136
--------------------------------------------------------------------------------------------------
Net periodic benefit cost. . . . . .  $  41,153   $ 102,663   $103,608  $104,692  $99,499  $92,295
================================================================================================
</TABLE>

As disclosed in the December 31, 2003 financial statements, no contributions are
expected  to  be  required  in  2004  for  the defined benefit pension plan. The
executive  excess  benefit  plan  and  other  post-retirement  benefit plans are
unfunded.  Cash  benefits paid under the executive excess plan for the first six
months  of 2004 were $12,550. Benefits paid under other post-retirement benefits
are  primarily  for  medical claims and were $87,000 for the first six months of
2004.


ITEM  2.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
             RESULTS  OF  OPERATIONS

BUSINESS  DESCRIPTION
Chesapeake  Utilities  Corporation  (the  "Company"  or  "Chesapeake")  is  a
diversified  utility  company  engaged  in  natural  gas  distribution  and
transmission, propane distribution and wholesale marketing, advanced information
services  and  other  related  businesses.

The  Company's  strategy is to grow earnings from a stable utility foundation by
investing  in  related  businesses  and  services that provide opportunities for
higher,  unregulated  returns.  This  growth  strategy includes acquisitions and
investments  in  unregulated  businesses as well as the continued investment and
expansion  of  the  Company's utility operations that provide the stable base of
earnings.  The  Company  continually  reevaluates its investments to ensure that
they  are  consistent  with  its  strategy and the goal of enhancing shareholder
value.  The  Company's  unregulated  businesses  and  services currently include
propane  distribution and wholesale marketing, advanced information services and
other  related  businesses.

Chesapeake  sold the assets and operations of six of its seven water dealerships
during  2003.  The  Company expects to dispose of the remaining operation during
2004.


FINANCIAL  POSITION,  LIQUIDITY  AND  CAPITAL  RESOURCES

The  Company's  capital requirements reflect the capital-intensive nature of its
business and are principally attributable to its construction program (described
below)  and  the  retirement  of  outstanding  debt.  The Company relies on cash
generated  by operations and short-term borrowing to meet normal working capital
requirements and to finance, temporarily, capital expenditures. During the first
six  months of 2004, net cash provided by operating activities, net cash used by
investing  activities  and  net  cash  used  by  financing  activities  were
approximately  $20.6  million,  $6.3  million  and  $7.1  million, respectively.

The  Board of Directors has authorized the Company to borrow up to $35.0 million
of  short-term debt from various banks and trust companies. As of June 30, 2004,
Chesapeake  had  five  unsecured  bank  lines  of  credit  with  three financial
institutions, totaling $65.0 million, for short-term cash needs to meet seasonal
working  capital  requirements and to fund, temporarily, portions of its capital
expenditures.  Two of the bank lines, totaling $15.0 million, are committed. The
remaining  three  lines  are subject to the banks' availability of funds. In the
first  six  months  of  2004,  cash  provided by operations was adequate to fund
capital  expenditures  and  repay  the  $3.5 million of short-term debt that was
outstanding  at December 31, 2003. At June 30, 2004, the Company had outstanding
an  irrevocable  letter of credit in the amount of $694,000 issued to one of the
Company's  insurance  providers.  The  letter  of  credit  reduced the available
borrowing  under  the  short-term  lines.

During  the six-month periods ended June 30, 2004 and 2003, capital expenditures
were  approximately  $6.6 million and $4.6 million, respectively. Chesapeake has
budgeted  $20.8  million  for  capital  expenditures  during  2004.  This amount
includes  $15.8  million  for  natural  gas  distribution and transmission, $4.1
million  for  propane  distribution  and  marketing,  $285,000  for  advanced
information  services  and  $614,000  for  other  operations.  The  natural  gas
distribution  and transmission expenditures are for expansion and improvement of
facilities.  The propane expenditures are to support customer growth and for the
replacement of equipment. The advanced information services expenditures are for
computer  hardware,  software and related equipment. The other operations budget
includes  general  plant, computer software and hardware expenditures. Financing
for  the  capital  expenditure program for the balance of 2004 is expected to be
provided  from cash on hand, short-term borrowing and cash provided by operating
activities.  The  capital expenditure program is subject to continual review and
modification.  Actual capital requirements may vary from the above estimates due
to  a  number  of factors including acquisition opportunities, changing economic
conditions,  customer  growth  in  existing  areas,  regulation, availability of
capital  and  new  growth  opportunities.

The  Company  has  budgeted $170,000 for capital expenditures in 2004 related to
environmental  remediation projects, and expects to make additional expenditures
in  future  years. Management does not expect any such expenditures or financing
to have a material adverse effect on the financial position or capital resources
of  the Company (see Note 3 to the Condensed Consolidated Financial Statements).

As  of  June  30,  2004  common  equity  represented  53.2  percent  of  total
capitalization,  compared  to  51.2  percent  as of December 31, 2003. Combining
short-term  financing with total capitalization, the equity component would have
been  52.1 percent and 48.8 percent for 2004 and 2003, respectively. The Company
remains  committed  to  maintaining  a sound capital structure and strong credit
ratings  in  order  to  provide  the  financial flexibility needed to access the
capital  markets  when required. This commitment, along with adequate and timely
rate  relief  for the Company's regulated operations, is intended to ensure that
the Company will be able to attract capital from outside sources at a reasonable
cost.

Interest  expense  for  the  first  six  months  of 2004 decreased approximately
$240,000,  or  8  percent, versus the same period in 2003. Interest on long-term
debt  accounted for $176,000 of the decrease. The average long-term debt balance
in  the first six months of 2004 was $72.0 million with an average interest rate
of  7.2  percent, compared to $76.0 million with an average interest rate of 7.2
percent  in  the  first six months of 2003. Additionally, interest on short-term
debt decreased $46,000 during the first half of 2004, compared to the first half
of  2003.  This  decrease  was the result of a decline in the average balance of
short-term  debt  from  $3.8 million in the first six months of 2003 to $298,000
for  the  first  six  months  of  2004.

OFF-BALANCE  SHEET  ARRANGEMENTS  AND  CONTRACTUAL  OBLIGATIONS
As  noted in the Company's 2003 Annual Report on Form 10-K, the only off-balance
sheet  arrangements  are  corporate guarantees to certain vendors of its propane
wholesale  marketing  subsidiary  and  a  letter  of  credit  issued to its main
insurance carrier. See Note 3 to the Condensed Consolidated Financial Statements
for  further  information.

There  have been no material changes in the contractual obligations presented in
the  Company's  2003  Annual  Report on Form 10-K, except for commodity purchase
obligations  and  forward  contracts  entered into in the ordinary course of the
Company's  business.  Below  is  a summary of the commodity and forward contract
obligations  at June 30, 2004. None of the commodity or forward contracts extend
beyond  2005.

<TABLE>
<CAPTION>
-----------------------------------------------------------------
                                     PAYMENTS DUE BY PERIOD
                               ----------------------------------
CONTRACTUAL OBLIGATIONS:          2004        2005        TOTAL
-----------------------------------------------------------------
<S>                            <C>         <C>         <C>
Commodities (1) . . . . . . .  $1,877,446  $  501,000  $2,378,446
Forward contracts propane (2)   5,363,707           -   5,363,707
-----------------------------------------------------------------
Total . . . . . . . . . . . .  $7,241,153  $  501,000  $7,742,153
=================================================================
</TABLE>

(1)  In addition to the obligations noted above, the natural gas distribution
     and propane distribution operations have agreements with commodity
     suppliers that have provisions which allow the Company to reduce or
     eliminate the quantities purchased. There are no monetary penalties for
     reducing the amounts purchased; however, the propane contracts allow the
     suppliers to reduce the amounts available in the winter season if the
     Company does not purchase specified amounts during the summer season. Under
     these contracts, the commodity prices will fluctuate with a market-based
     index.
(2)  The Company has also entered into forward and future sale contracts of
     $8,041,169. See the "Quantitative and Qualitative Disclosures about Market
     Risk" section of the Management's Discussion and Analysis of Financial
     Condition and Results of Operations portion of this report for further
     information.

<PAGE>


RESULTS  OF  OPERATIONS  FOR  THE  QUARTER  ENDED  JUNE  30,  2004

CONSOLIDATED  OVERVIEW
The  Company  earned  net income from continuing operations of $612,000 or $0.11
per share, for the second quarter of 2004, a decline of $323,000 compared to net
income  from  continuing  operations  of  $935,000,  or  $0.17 per share for the
corresponding  period  in  2003. The decrease in earnings principally reflects a
decline  in  margins and operating income for the Company's Delmarva natural gas
and  propane operations caused by warmer temperatures on the Delmarva Peninsula.
Management  estimates  that  the  warmer  weather  reduced margins and operating
income  by  $677,000  for  the  quarter.  Gross  margin  increases  related  to
residential  customer  growth  for  natural  gas  distribution  and  natural gas
transmission's  firm  transportation  services  partially  offset  this decline.
Operating  expenses  were  also  up  as  a  result  of  customer  growth.

See  Note 1 to the Condensed Consolidated Financial Statements for a description
of  the  restatement  that  was  made  in the fourth quarter of 2003. Additional
information  can also be found in the Company's report on Form 10-K for the year
ended  December  31,  2003.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
                                                2004          2003
 FOR THE THREE MONTHS ENDED JUNE 30, . . .                  RESTATED       CHANGE
------------------------------------------------------------------------------------
Operating Income
<S>                                         <C>           <C>           <C>
   Natural Gas Distribution & Transmission  $ 2,696,914   $ 2,993,220   $  (296,306)
   Propane . . . . . . . . . . . . . . . .     (881,576)     (390,032)     (491,544)
   Advanced Information Services . . . . .      259,750       164,301        95,449
   Other . . . . . . . . . . . . . . . . .       87,706        94,028        (6,322)
------------------------------------------------------------------------------------
 Operating Income. . . . . . . . . . . . .    2,162,794     2,861,517      (698,723)

 Other Income. . . . . . . . . . . . . . .       74,217        34,257        39,960
 Interest Charges. . . . . . . . . . . . .    1,328,231     1,429,005      (100,774)
 Income Taxes. . . . . . . . . . . . . . .      297,262       532,233      (234,971)
------------------------------------------------------------------------------------
 Net Income from Continuing Operations . .  $   611,518   $   934,536   $  (323,018)
====================================================================================
</TABLE>

The  following  discussions  of  segment  results include use of the term "gross
margin."  Gross  margin  is  determined  by  deducting  the  cost  of sales from
operating revenue. Cost of sales includes the purchased gas cost for the natural
gas and propane segments and the cost of labor spent on direct revenue-producing
activities for advanced information services segment. Gross margin should not be
considered  an  alternative  to  operating  income  or  net  income,  which  are
determined in accordance with Generally Accepted Accounting Principles ("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 certain performance goals and has
historically  analyzed  and  reported  gross  margin  information  in its public
filings  and  presentations.  Other  companies  may  calculate gross margin in a
different  manner.

<PAGE>

NATURAL  GAS  DISTRIBUTION  AND  TRANSMISSION
The natural gas distribution and transmission segment earned operating income of
$2.7  million  for  the  second quarter of 2004 compared to $3.0 million for the
corresponding  period  last  year,  a  decrease  of  $296,000.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
                                                2004          2003
 FOR THE THREE MONTHS ENDED JUNE 30, . . .                  RESTATED       CHANGE
------------------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>
 Revenue . . . . . . . . . . . . . . . . .  $25,136,271   $22,125,842   $ 3,010,429
 Cost of gas . . . . . . . . . . . . . . .   15,111,043    12,365,393     2,745,650
------------------------------------------------------------------------------------
 Gross margin. . . . . . . . . . . . . . .   10,025,228     9,760,449       264,779

 Other Operating Expenses:
   Operations & maintenance. . . . . . . .    5,216,174     4,752,182       463,992
   Depreciation & amortization . . . . . .    1,359,816     1,315,830        43,986
   Other taxes . . . . . . . . . . . . . .      752,324       699,217        53,107
------------------------------------------------------------------------------------
 Other operating expenses. . . . . . . . .    7,328,314     6,767,229       561,085
------------------------------------------------------------------------------------
 Total Operating Income. . . . . . . . . .  $ 2,696,914   $ 2,993,220   $  (296,306)
====================================================================================
</TABLE>

Gross  margins  for  the  Delaware and Maryland distribution divisions decreased
$270,000  from  2003.  This  was caused primarily by a temperature decline of 31
percent (194 heating degree-days) for the second quarter of 2004 compared to the
second  quarter  of  2003.  Management  estimates that warmer weather negatively
impacted  2004  margins by $349,000. In the second quarter of 2004, temperatures
were  14  percent  warmer (68 heating degree-days) than the 10-year average. The
Company estimates that, on an annual basis, for each heating degree-day variance
from  the  10-year average, the gross margin on gas sales changes by $1,800. The
decline  due  to  temperatures was partially offset by customer growth. Delaware
and  Maryland  experienced  an  increase  of  2,211  residential customers, or 7
percent,  in  the second quarter of 2004 compared to the second quarter of 2003.
The  increase  was primarily the result of new housing construction. The Company
estimates  that  each  residential  customer  added contributes $372 annually to
gross  margin  and  requires  an  additional  cost  of  $104  for operations and
maintenance  expenses.  Gross  margin  for  the  Florida operations increased by
$239,000,  due  to  an  increase  of  6.8  percent  in the number of residential
customers  and  growth  in  the  industrial  gross  margin.  The  natural  gas
transmission  gross  margin  increased by $292,000 resulting from an increase in
transportation  services.  Other operating expenses, primarily payroll, pension,
insurance  and  customer  service  costs,  were  higher primarily as a result of
customer  growth.  Depreciation  was  also  higher,  reflecting  the  continued
investment  in  plant  assets.

PROPANE
During the second quarter of 2004, the propane segment experienced a decrease of
$492,000  in operating income compared to the second quarter of 2003, reflecting
a  gross  margin  decrease  of $370,000 and an increase of $121,000 in operating
expenses.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
 FOR THE THREE MONTHS ENDED JUNE 30, . . .      2004          2003         CHANGE
------------------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>
 Revenue . . . . . . . . . . . . . . . . .  $ 5,754,405   $ 5,537,407   $   216,998
 Cost of sales . . . . . . . . . . . . . .    3,258,284     2,671,033       587,251
------------------------------------------------------------------------------------
 Gross margin. . . . . . . . . . . . . . .    2,496,121     2,866,374      (370,253)

 Other Operating Expenses:
   Operations & maintenance. . . . . . . .    2,854,614     2,694,718       159,896
   Depreciation & amortization . . . . . .      370,935       373,461        (2,526)
   Other taxes . . . . . . . . . . . . . .      152,148       188,227       (36,079)
------------------------------------------------------------------------------------
 Other operating expenses. . . . . . . . .    3,377,697     3,256,406       121,291
------------------------------------------------------------------------------------
 Total Operating Loss. . . . . . . . . . .  $  (881,576)  $  (390,032)  $  (491,544)
====================================================================================
</TABLE>

The  Delmarva  distribution  operations  experienced  a  drop in gross margin of
$393,000.  Management  estimates that warmer weather negatively impacted margins
by  $328,000.  Temperatures in the second quarter of 2004 were 31 percent warmer
than  the second quarter of 2003 (194 heating degree-days) and 14 percent warmer
than the 10-year average (68 heating degree-days). The Company estimates that on
an annual basis, gross margin changes by $1,691 for each heating degree-day. The
Florida  propane  distribution  operations  experienced an increase in operating
losses  of  $26,000. An increase of $20,000 in gross margin was more than offset
by  an  increase  in  other  operating  expenses, primarily sales and marketing.

The  Company's  propane wholesale marketing operation increased operating income
$18,000  over  the  second  quarter  of 2003. Gross margins were essentially the
same;  however,  other  operating  expenses  were  lower.

ADVANCED  INFORMATION  SERVICES
The  advanced  information  services  business  contributed  operating income of
$260,000  for  the  second quarter of 2004, an increase of $95,000 or 58 percent
over  the  second  quarter  of  last  year.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
 FOR THE THREE MONTHS ENDED JUNE 30, . . .      2004          2003         CHANGE
------------------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>
 Revenue . . . . . . . . . . . . . . . . .  $ 3,450,895   $ 3,215,343   $   235,552
 Cost of sales . . . . . . . . . . . . . .    1,864,710     1,870,909        (6,199)
------------------------------------------------------------------------------------
 Gross margin. . . . . . . . . . . . . . .    1,586,185     1,344,434       241,751

 Other Operating Expenses:
   Operations & maintenance. . . . . . . .    1,176,368       997,277       179,091
   Depreciation & amortization . . . . . .       34,530        48,758       (14,228)
   Other taxes . . . . . . . . . . . . . .      115,537       134,098       (18,561)
------------------------------------------------------------------------------------
 Other operating expenses. . . . . . . . .    1,326,435     1,180,133       146,302
------------------------------------------------------------------------------------
 Total Operating Income. . . . . . . . . .  $   259,750   $   164,301   $    95,449
====================================================================================
</TABLE>

The  advanced  information  services segment has increased its revenue primarily
due  to  increased  software sales. The cost of sales did not rise in proportion
because  all  development  costs  associated  with internally-developed software
products  are expensed as incurred. Additionally, compensation arrangements with
the  Company's  consultants  have  been  revised  to include lower base pay, but
higher  incentive  compensation  based  on  productive  hours.  Operations  and
maintenance  costs  increased  primarily  due  to  software development costs to
enhance  a  software  product  and  increased  incentive  compensation  for
administrative  and  management  employees.

<PAGE>
OTHER  BUSINESS  OPERATIONS  AND  ELIMINATIONS
Other operations and eliminating entries contributed operating income of $88,000
for  the  second  quarter  of  2004 compared to income of $94,000 for the second
quarter  of  last  year. Other operations consist primarily of subsidiaries that
own  real  estate leased to other Company subsidiaries. Eliminations are entries
required to eliminate activities between business segments from the consolidated
results.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
 FOR THE THREE MONTHS ENDED JUNE 30, . . .      2004          2003         CHANGE
------------------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>
 Revenue . . . . . . . . . . . . . . . . .  $   168,686   $   175,150   $    (6,464)
 Cost of sales . . . . . . . . . . . . . .            -             -             -
------------------------------------------------------------------------------------
 Gross margin. . . . . . . . . . . . . . .      168,686       175,150        (6,464)

 Other Operating Expenses:
   Operations & maintenance. . . . . . . .       20,399        12,902         7,497
   Depreciation & amortization . . . . . .       53,929        59,529        (5,600)
   Other taxes . . . . . . . . . . . . . .       14,691        13,405         1,286
------------------------------------------------------------------------------------
 Other operating expenses. . . . . . . . .       89,019        85,836         3,183
------------------------------------------------------------------------------------
 Operating Income - Other. . . . . . . . .       79,667        89,314        (9,647)
 Operating Income - Eliminations . . . . .        8,039         4,714         3,325
------------------------------------------------------------------------------------
 Total Operating Income. . . . . . . . . .  $    87,706   $    94,028   $    (6,322)
====================================================================================
</TABLE>

DISCONTINUED  OPERATIONS
In  2003,  Chesapeake  decided to exit the water services business. Six of seven
water  dealerships  were sold during 2003. The Company expects to dispose of the
remaining  operation  during 2004. Accordingly, the assets are recorded at their
fair  value.  The  results  of  the  water companies' operations for all periods
presented  in  the  consolidated  income  statements,  have been reclassified to
discontinued  operations  and  shown  net of tax. For the second quarter of 2004
they  earned  income  of  $19,000,  compared to an immaterial loss in the second
quarter  of  2003.

INCOME  TAXES
The Company's income tax cost for the second quarter of 2004 was lower than 2003
due  to  lower  income.  The federal income tax rate was consistent from year to
year.

INTEREST  EXPENSE
Interest  for  the second quarter of 2004 decreased approximately $101,000, or 7
percent,  over the same period in 2003. The decrease resulted from the scheduled
repayments  of  principal  of  long-term  debt  and  lower short-term borrowing.

The  average  long-term  debt  balance  in  the second quarter of 2004 was $72.0
million  with an average interest rate of 7.2 percent, compared to $76.0 million
with  an average interest rate of 7.3 percent in the second quarter of 2003. The
Company  did  not  borrow  against  its  short-term credit facilities during the
second  quarter  of  2004.  In  the second quarter of 2003 the average borrowing
balance  for  short-term  debt  was  $337,000.

<PAGE>
RESULTS  OF  OPERATIONS  FOR  THE  SIX  MONTHS  ENDED  JUNE  30,  2004

CONSOLIDATED  OVERVIEW
The  Company  earned  income from continuing operations of $6.4 million or $1.10
per  share, for the first six months of 2004, a decline of $1.2 million compared
to income from continuing operations of $7.6 million, or $1.33 per share for the
corresponding  period  in  2003. The decrease in earnings principally reflects a
decline  in  operating  income  caused  by  warmer  temperatures on the Delmarva
Peninsula.  Management estimates that warmer weather negatively impacted margins
by $1.1 million. The natural gas segment was able to partially offset the impact
of  warmer  weather  through  customer  growth.

See  Note 1 to the Condensed Consolidated Financial Statements for a description
of  the  restatement  that  was  made  in the fourth quarter of 2003. Additional
information  can also be found in the Company's report on Form 10-K for the year
ended  December  31,  2003.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
                                                2004          2003
 FOR THE SIX MONTHS ENDED JUNE 30, . . . .                  RESTATED       CHANGE
------------------------------------------------------------------------------------
 Operating Income
<S>                                         <C>           <C>           <C>
   Natural Gas Distribution & Transmission  $ 9,914,667   $10,273,874   $  (359,207)
   Propane . . . . . . . . . . . . . . . .    2,440,082     4,495,450    (2,055,368)
   Advanced Information Services . . . . .      331,835       226,634       105,201
   Other & eliminations. . . . . . . . . .      175,516       176,738        (1,222)
------------------------------------------------------------------------------------
 Operating Income. . . . . . . . . . . . .   12,862,100    15,172,696    (2,310,596)

 Other Income. . . . . . . . . . . . . . .      176,694        88,157        88,537
 Interest Charges. . . . . . . . . . . . .    2,654,997     2,894,855      (239,858)
 Income Taxes. . . . . . . . . . . . . . .    3,998,745     4,794,359      (795,614)
------------------------------------------------------------------------------------
 Net Income from Continuing Operations . .  $ 6,385,052   $ 7,571,639   $(1,186,587)
====================================================================================
</TABLE>

The  following  discussions  of  segment  results include use of the term "gross
margin."  Gross  margin  is  determined  by  deducting  the  cost  of sales from
operating revenue. Cost of sales includes the purchased gas cost for the natural
gas and propane segments and the cost of labor spent on direct revenue-producing
activities for advanced information services segment. Gross margin should not be
considered  an  alternative  to  operating  income  or  net  income,  which  are
determined in accordance with Generally Accepted Accounting Principles ("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 certain performance goals and has
historically  analyzed  and  reported  gross  margin  information  in its public
filings  and  presentations.  Other  companies  may  calculate gross margin in a
different  manner.

<PAGE>
NATURAL  GAS  DISTRIBUTION  AND  TRANSMISSION
The natural gas distribution and transmission segment earned operating income of
$9.9  million for the first six months of 2004 compared to $10.3 million for the
corresponding  period  last  year,  a  decrease  of  $359,000.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
                                                2004          2003
 FOR THE SIX MONTHS ENDED JUNE 30, . . . .                  RESTATED       CHANGE
------------------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>
 Revenue . . . . . . . . . . . . . . . . .  $67,498,243   $61,647,722   $ 5,850,521
 Cost of gas . . . . . . . . . . . . . . .   42,529,942    37,613,199     4,916,743
------------------------------------------------------------------------------------
 Gross margin. . . . . . . . . . . . . . .   24,968,301    24,034,523       933,778

 Other Operating Expenses:
   Operations & maintenance. . . . . . . .   10,739,027     9,689,101     1,049,926
   Depreciation & amortization . . . . . .    2,703,097     2,563,832       139,265
   Other taxes . . . . . . . . . . . . . .    1,611,510     1,507,716       103,794
------------------------------------------------------------------------------------
 Other operating expenses. . . . . . . . .   15,053,634    13,760,649     1,292,985
------------------------------------------------------------------------------------
 Total Operating Income. . . . . . . . . .  $ 9,914,667   $10,273,874   $  (359,207)
====================================================================================
</TABLE>

Gross  margin  for  the  Delaware  and  Maryland  distribution  divisions  was
essentially  even  with  2003  due  to  an increase in customers that offset the
negative  impact  of  warmer  temperatures. Delaware and Maryland experienced an
increase  of  2,144  residential customers, or 6.7 percent, in the first half of
2004  compared  to  2003.  The  increase was primarily the result of new housing
construction.  The  Company  estimates  that  each  residential  customer  added
contributes  $372  annually  to  gross margin and requires an additional cost of
$104  for  operations and maintenance expenses. This growth offset a temperature
decline of 10 percent (307 heating degree-days) for the first six months of 2004
compared  to  the  same  period  of  2003.  Management  estimates  that  warmer
temperatures  negatively  impacted  margins  by  $553,000.  Temperatures  were 4
percent  colder  (114 heating degree-days) than the 10-year average. The Company
estimates that, on an annual basis, each heating degree-day changes gross margin
on  gas  sales  by  $1,800.

Gross  margin for the Florida distribution operations increased by $509,000, due
to an increase of 6 percent in the number of residential customers and growth in
the industrial gross margin. The natural gas transmission gross margin increased
by  $424,000.  Firm  transportation  services  increased  $293,000  due  to firm
customers  adding capacity. Additionally, interruptible transportation increased
$130,000  over  2003.

The  gross  margin  increases were offset by higher operating expenses primarily
due  to  customer  growth.  Payroll,  benefits  and  insurance  costs  were  up.
Depreciation  was  also  higher,  reflecting  the  continued investment in plant
assets.

<PAGE>
PROPANE
During  the first six months of 2004, the propane segment experienced a decrease
of  $2.1  million  in  operating  income  compared  to  the  first half of 2003,
reflecting  a gross margin decrease of $2.2 million that was partially offset by
a  $123,000  decrease  in  operating  expenses.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
 FOR THE SIX MONTHS ENDED JUNE 30, . . . .      2004          2003         CHANGE
------------------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>
 Revenue . . . . . . . . . . . . . . . . .  $24,214,662   $25,784,434   $(1,569,772)
 Cost of sales . . . . . . . . . . . . . .   14,564,816    13,956,129       608,687
------------------------------------------------------------------------------------
 Gross margin. . . . . . . . . . . . . . .    9,649,846    11,828,305    (2,178,459)

 Other Operating Expenses:
   Operations & maintenance. . . . . . . .    6,037,163     6,156,925      (119,762)
   Depreciation & amortization . . . . . .      753,962       758,365        (4,403)
   Other taxes . . . . . . . . . . . . . .      418,639       417,565         1,074
------------------------------------------------------------------------------------
 Other operating expenses. . . . . . . . .    7,209,764     7,332,855      (123,091)
------------------------------------------------------------------------------------
 Total Operating Income. . . . . . . . . .  $ 2,440,082   $ 4,495,450   $(2,055,368)
====================================================================================
</TABLE>

The  Delmarva distribution operations experienced a drop in gross margin of $1.1
million,  caused primarily by warmer temperatures. Retail volumes sold decreased
837,000 gallons, or 6 percent for the first six months of 2004 compared to 2003.
Management  estimates  that  the  negative impact of weather on gross margin was
$519,000.  Temperatures  in  the first six months of 2004 were 10 percent warmer
than the first six months of 2003 (307 heating degree-days) but 4 percent colder
than  the  10-year average (114 heating degree-days). The Company estimates that
on  an  annual  basis, each heating degree-day generates gross margin of $1,691.
Additionally,  there  was  a  reduction  caused  by  the  closing  of  a poultry
processing  plant  and  by  an  outbreak  of  avian  influenza  on  the Delmarva
Peninsula. The Florida propane distribution operations experienced a decrease in
gross  margin  of $162,000. The decrease was due primarily to a one-time service
project  that  contributed  $192,000  to  the  2003  gross  margin.

The  Company's  propane  wholesale marketing operation experienced a decrease in
gross  margin  of  $921,000  and  a  decrease of $284,000 in operating expenses,
leading  to  a reduction of $637,000 in operating income. Results for the second
quarter  were  consistent  for  2004  and  2003;  however, lower wholesale price
volatility  reduced  trading  opportunities  during  the  first  quarter of 2004
compared  to  2003.

ADVANCED  INFORMATION  SERVICES
The  advanced  information  services  business  contributed  operating income of
$332,000 for the first six months of 2004 compared to $227,000 for the first six
months  of  last  year,  an  increase  of  $105,000.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
 FOR THE SIX MONTHS ENDED JUNE 30, . . . .      2004          2003         CHANGE
------------------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>
 Revenue . . . . . . . . . . . . . . . . .  $ 6,461,030   $ 6,486,595   $   (25,565)
 Cost of sales . . . . . . . . . . . . . .    3,543,487     3,762,162      (218,675)
------------------------------------------------------------------------------------
 Gross margin. . . . . . . . . . . . . . .    2,917,543     2,724,433       193,110

 Other Operating Expenses:
   Operations & maintenance. . . . . . . .    2,230,196     2,108,123       122,073
   Depreciation & amortization . . . . . .       73,675        98,871       (25,196)
   Other taxes . . . . . . . . . . . . . .      281,837       290,805        (8,968)
------------------------------------------------------------------------------------
 Other operating expenses. . . . . . . . .    2,585,708     2,497,799        87,909
------------------------------------------------------------------------------------
 Total Operating Income. . . . . . . . . .  $   331,835   $   226,634   $   105,201
====================================================================================
</TABLE>

During  the  first  half  of 2004 revenues for the advanced information services
operations  remained  consistent  with 2003; however, a reduction in the cost of
sales  resulted in increased gross margins. The reduced cost of sales reflects a
staff  reduction  that  reduced  non-billable hours and a change in compensation
arrangements  with the Company's consultants that reduced base pay and increased
incentive  compensation  that  is  based  on  billable  hours worked. Operations
expenses  increased  as  a  result  of  increases  in incentive compensation and
development  work  to  enhance  a  software  product.

OTHER  BUSINESS  OPERATIONS  AND  ELIMINATIONS
Other  operations  and  eliminating  entries  contributed  operating  income  of
$176,000 for the first six months of 2004 compared to income of $177,000 for the
first  six  months  of  last  year.  Other  operations  consist  primarily  of
subsidiaries  that  own  real  estate  leased  to  other  Company  subsidiaries.
Eliminations  are  entries  required  to  eliminate  activities between business
segments  from  the  consolidated  results.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
 FOR THE SIX MONTHS ENDED JUNE 30, . . . .      2004          2003         CHANGE
------------------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>
 Revenue . . . . . . . . . . . . . . . . .  $   338,132   $   352,570   $   (14,438)
 Cost of sales . . . . . . . . . . . . . .            -             -             -
------------------------------------------------------------------------------------
 Gross margin. . . . . . . . . . . . . . .      338,132       352,570       (14,438)

 Other Operating Expenses:
   Operations & maintenance. . . . . . . .       41,648        40,332         1,316
   Depreciation & amortization . . . . . .      107,139       119,059       (11,920)
   Other taxes . . . . . . . . . . . . . .       29,907        27,605         2,302
------------------------------------------------------------------------------------
 Other operating expenses. . . . . . . . .      178,694       186,996        (8,302)
------------------------------------------------------------------------------------
 Operating Income - Other. . . . . . . . .      159,438       165,574        (6,136)
 Operating Income - Eliminations . . . . .       16,078        11,164         4,914
------------------------------------------------------------------------------------
 Total Operating Income. . . . . . . . . .  $   175,516   $   176,738   $    (1,222)
====================================================================================
</TABLE>

DISCONTINUED  OPERATIONS
In  2003,  Chesapeake  decided to exit the water services business. Six of seven
water  dealerships  were sold during 2003. The Company expects to dispose of the
remaining  operation  during 2004. Accordingly, the assets are recorded at their
fair  value.  The  results  of  the  water companies' operations for all periods
presented  in  the  consolidated  income  statements,  have been reclassified to
discontinued  operations  and shown net of tax. For the first six months of 2004
they  experienced  an  operating loss of $15,000, compared to a loss of $163,000
for  the  same  period  in  2003.

INCOME  TAXES
The  Company's  income tax cost for the six months ended June 30, 2004 was lower
than  2003  due to lower income. The federal income tax rate was consistent from
year  to  year.

INTEREST  EXPENSE
Interest  for  the  first  half  of  2004 decreased approximately $240,000, or 8
percent,  over the same period in 2003. The decrease resulted from the scheduled
repayments  of  principal  of  long-term  debt  and  lower short-term borrowing.

The  average  long-term  debt balance for the first six months of 2004 was $72.0
million  with an average interest rate of 7.2 percent, compared to $76.0 million
with  an  average  interest rate of 7.2 percent for the same period in 2003. The
average short-term borrowing for the first half of 2004 was $298,000 compared to
$3.8  million  for  2003.

ENVIRONMENTAL  MATTERS
As  more  fully  described  in  Note  3  to the Condensed Consolidated Financial
Statements,  Chesapeake has completed its responsibilities related to one former
gas  manufacturing  plant  site  and  is  currently  participating  in  the
investigation,  assessment  or remediation of two other former gas manufacturing
plant  sites. The Company continues to work with federal and state environmental
agencies  to  assess the environmental impact and explore options for corrective
action  at  these  sites. The Company believes that future costs associated with
these  sites  will be recoverable in rates or through sharing arrangements with,
or  contributions  by,  other responsible parties. The Company is in discussions
with  the  Maryland  Department of the Environment regarding a fourth former gas
manufacturing  plant  site  located  in Cambridge, Maryland. The outcome of this
matter  cannot  be  determined  at  this  time.

OTHER  MATTERS

REGULATORY  MATTERS
The  Delaware,  Maryland  and  Florida  Public  Service Commissions regulate the
Company's  natural  gas  distribution  operations,  while  its  natural  gas
transmission  operation is regulated by the Federal Energy Regulatory Commission
("FERC").

On  April 1, 2003, Eastern Shore filed an application before the FERC requesting
authorization  for the following: (1) Phase I - upgrade of Parkesburg Metering &
Regulating  Station;  (2)  Phase II - construct and operate 2.7 miles of 16-inch
mainline  looping in Pennsylvania; and (3) Phase III - construct and operate 3.0
miles  of  16-inch  mainline looping and a pressure control station in Delaware.
The  purpose  of  this  construction  is  to  enable  Eastern  Shore  to provide
additional  daily  firm  transportation capacity of 15,100 dekatherms on Eastern
Shore's  system  phased in over a three-year period commencing November 1, 2003.
Phase  I  of this expansion was completed and placed into service on November 1,
2003.  Bids  for  Phase  II  construction  were received and a contract awarded.
Construction  for  Phase II started in July 2004 with a projected completion and
in-service  date  of  November  2004.

During  October  2002,  Eastern  Shore  filed  an  application with the FERC for
recovery  of  gas supply realignment costs associated with the implementation of
FERC  Order  No.  636. The costs totaled $196,000 (including interest). The FERC
has  declined  to  review  Eastern  Shore's  filing until it had first settled a
related matter with another transmission company. The other transmission company
submitted  a  filing  on  December  5,  2003.  Eastern  Shore  will resubmit its
transition  cost  recovery  filing  immediately  upon  learning  of  the  FERC's
approval.

On December 16, 2003, Eastern Shore filed with the FERC revised tariff sheets to
implement  revisions  to  its  Fuel  Retention  and  Cash  Out  provisions. Fuel
Retention  refers to the in-kind reimbursement of natural gas by Eastern Shore's
customers  necessary  to transport natural gas on Eastern Shore's pipeline. Such
Fuel  Retention  is designed to reimburse Eastern Shore for the Gas Required for
Operations  ("GRO"),  which consists of (1) gas used for compressor fuel and (2)
gas  otherwise  used,  lost or unaccounted for. Cash Out refers to the month-end
process  of  resolving  customer  imbalances,  that  is,  the difference, either
positive  or  negative,  between  natural  gas  received  by Eastern Shore for a
customer's  account  and  the  natural  gas  delivered  by Eastern Shore to that
customer.  Rather  than  carry  such  in-kind imbalances forward on a continuing
basis,  Eastern  Shore's  tariff permits it to buy or sell such imbalance gas to
its  customers,  thus  effectively eliminating any imbalance created through the
month.  These  revisions  went  into  effect  on  January  15,  2004.

The  proposed  tariff revisions permit Eastern Shore to incorporate its Deferred
Gas  Required  for  Operations  amounts  into the calculation of its annual Fuel
Retention  Percentage ("FRP") Adjustment and to implement a surcharge, effective
July  1  of  each  year,  to recover cash-out amounts. Deferred Gas Required for
Operations  is  the difference between Eastern Shore's calculated fuel retention
using  its  approved  FRP and its actual fuel requirements resulting from actual
operations  in a given month. Such differences, either positive or negative, are
determined  each month during the determination period and become a component of
Eastern  Shore's prospective FRP. This calculation is effectively a "true-up" to
the  fuel  retained by Eastern Shore so it recovers no more and no less than its
actual  fuel  requirements.  Fuel  Retention Percentage Adjustment is the annual
establishment  of  Eastern  Shore's new FRP to be effective July 1 of each year.
The  percentage  adjustment  is simply the difference between the current FRP in
effect  and  the  new FRP as proposed to be in effect. The FERC accepted Eastern
Shore's  revised tariff sheets on January 15, 2004, subject to certain revisions
to  clarify  the tariff sheets. On January 30, 2004, Eastern Shore submitted the
revised  tariff  sheets.

Eastern  Shore, on February 9, 2004, filed with the FERC a Plan and Schedule for
Standards of Conduct Compliance as directed by the FERC's Order No. 2004, issued
on  November 25, 2003. Such Standards of Conduct govern the relationship between
transmissions  providers  such  as  Eastern  Shore  and their energy affiliates.

Order  No.  2004  revises and conforms the current gas and electric standards by
broadening  the  definition  of an energy affiliate covered by such standards of
conduct  and  applies  them  uniformly  to  natural  gas  pipeline  and electric
transmission  providers.  Further,  the  standards will assure that transmission
providers  cannot  extend  their  market power over transmission to other energy
markets  by  giving  their  energy affiliates unduly preferential treatment. The
standards also help ensure transmission providers offer service to all customers
on a non-discriminatory basis. The deadline for compliance with the Standards of
Conduct  is  September  1,  2004.  Numerous  requests  for  clarifications and a
rehearing  have been submitted to FERC by other parties. At this time, there has
been  no  change  in  the  September  1, 2004 compliance deadline, Eastern Shore
continues  to  monitor  this  closely and will react appropriately to any future
rulings  of  the  FERC.

Eastern  Shore  is  also  following  the  FERC's recent rulemaking pertaining to
creditworthiness  standards  for interstate natural gas pipelines. Eastern Shore
will  evaluate  its  current  tariff  creditworthiness  provisions  and make any
necessary  revisions  to conform to the FERC's rules relating to such standards.

On  May  27,  2004  the  FERC  accepted  Eastern  Shore's  annual  Interruptible
Transportation ("IT") Revenue Sharing report. Eastern Shore refunded $119,595 to
its  customers  in  compliance with the IT revenue sharing provision detailed in
the  Stipulation  and  Agreement  in Docket No. RP02-34-000 currently in effect.

On  May 28, 2004 the FERC accepted Eastern Shore's annual GRO filing authorizing
a  new  FRP  to  be made effective July 1, 2004. The new FRP is based on Eastern
Shore's  actual  GRO  quantities  attributable to system-wide operations for the
twelve-month  period  ending  April  30,  2004  plus  the  balance  of  $548,203
accumulated  in  its  Deferred  GRO  Account  at  March  31,  2004.

On  June  22,  2004  the  FERC  accepted  Eastern Shore's annual Cash Out filing
authorizing  a  new  Cash  Out  surcharge  0f  $0.0033  per dekatherm to be made
effective  July  1,  2004. The new Cash Out surcharge is designed to recover the
under-recovered  balance of $59,304 accumulated in its Cash Out account at March
31,  2004.

On  November  19,  2001,  the Florida division filed a petition with the Florida
Public  Service  Commission for approval of certain transportation cost recovery
rates. The Florida PSC approved the rates on January 24, 2002, which provide for
the  recovery,  over  a  two-year  period,  of the Florida division's actual and
projected  non-recurring  expenses  incurred  in  the  implementation  of  the
transportation  provisions  of  the  tariff  as approved in a November 2000 rate
case. The Florida division filed a petition on February 4, 2004, to dispose of a
minor  under-recovery  of  the  actual expenses incurred to implement the tariff
provisions.  The  petition was approved by the Florida PSC at its March 23, 2004
agenda  conference.

On  November 5, 2002, the Florida PSC authorized a pilot program under which the
Florida  division  converted  all  remaining  sales  customers to transportation
service and exited the gas merchant function. Implementation of Phase One of the
Transitional  Transportation  Service  ("TTS") program was completed in November
2002,  and  the  Florida  division  is now actively providing the administrative
services  as approved by the Florida PSC, including billing, collection service,
payment  tracking,  non-pay  disconnects,  various  account  reports and related
administrative  activities.

On  July 15, 2003, the Florida PSC approved a rate restructuring proposed by the
Florida  division.  The restructuring created three new low volume rate classes,
with customer charge levels that ensure that all customers receive benefits from
the  TTS  program.

On  January  4,  2004, the Florida PSC authorized the Florida division to refund
the  remaining  balance  in  its  over-recovered  purchased  gas  costs account,
totaling $246,000, as a final step in its exit of the gas merchant function. The
refund  was  completed  in  March  2004.

On  May  3,  2004,  the  Florida  division  filed  its Conservation Program Cost
Recovery  True-up  for  the calendar year 2003 with the Florida PSC. The Florida
PSC will audit the program's revenues and expenditures and issue a report on its
findings  during  the  third  quarter  of  2004.

COMPETITION
The  Company's  natural  gas  operations  compete  with  other  forms  of energy
including  electricity,  oil  and propane. The principal competitive factors are
price,  and  to  a  lesser  extent,  accessibility.  The  Company's  natural gas
distribution operations have several large volume industrial customers that have
the  capacity  to use fuel oil as an alternative to natural gas. When oil prices
decline,  these  interruptible  customers  convert  to oil to satisfy their fuel
requirements.  Lower  levels  in  interruptible  sales occur when oil prices are
lower relative to the price of natural gas. Oil prices, as well as the prices of
electricity and other fuels are subject to fluctuation for a variety of reasons;
therefore,  future  competitive  conditions are not predictable. To address this
uncertainty,  the  Company uses flexible pricing arrangements on both the supply
and  sales  sides  of its business to maximize sales volumes. As a result of the
transmission business' conversion to open access, this business has shifted from
providing  competitive  sales  service  to providing transportation and contract
storage  services.

The  Company's natural gas distribution operations located in Delaware, Maryland
and  Florida  offer  transportation services to certain industrial customers. In
2001,  the  Florida  operation  extended  transportation  service  to commercial
customers  and,  in  2002, to residential customers. With transportation service
now  available  on  the Company's distribution systems, the Company is competing
with third party suppliers to sell gas to industrial customers. As it relates to
transportation  services,  the  Company's  competitors  include  the  interstate
transmission company if the distribution customer is located close enough to the
transmission  company's pipeline to make a connection economically feasible. The
customers  at  risk are usually large volume commercial and industrial customers
with  the  financial  resources  and  capability  to  bypass  the  distribution
operations  in  this  manner. In certain situations, the distribution operations
may  adjust services and rates for these customers to retain their business. The
Company expects to continue to expand the availability of transportation service
to  additional  classes  of  distribution  customers  in the future. The Company
established  a  natural  gas  sales  and  supply operation in Florida in 1994 to
compete  for  customers  eligible  for  transportation  services.

The Company's propane distribution operations compete with several other propane
distributors in their service territories, primarily on the basis of service and
price,  emphasizing  reliability  of  service and responsiveness. Competition is
generally  from  local  outlets  of  national  distribution  companies and local
businesses,  because  distributors located in close proximity to customers incur
lower  costs  of  providing service. Propane competes primarily with electricity
and  heating oil as energy sources. Since natural gas has historically been less
expensive than propane, propane is generally not distributed in geographic areas
serviced  by  natural  gas  pipeline  or  distribution  systems.

The  propane  wholesale  marketing operation competes against various marketers,
many  of which have significantly greater resources and are able to obtain price
or  volumetric  advantages.

The  advanced information services business faces significant competition from a
number of larger competitors having substantially greater resources available to
them  than  does  the  Company. In addition, changes in the advanced information
services  business  are  occurring  rapidly,  which  could  adversely impact the
markets  for the products and services offered by these businesses. This segment
competes  on  the  basis  of  technological  expertise,  reputation  and  price.

RECENT  PRONOUNCEMENTS
On  January 12, 2004, the Financial Accounting Standards Board ("FASB") released
FASB  Staff  Position  No.  Statement of Financial Accounting Standards ("SFAS")
106-1  "Accounting  and  Disclosure  Requirements  Related  to  the  Medicare
Prescription  Drug,  Improvement  and Modernization Act of 2003" ("the Act"). On
May  19,  2004,  the  FASB  released  FASB  Staff  Position No. SFAS 106-2 which
superseded  SFAS  106-1.  SFAS No. 106-2 provides guidance on the accounting for
the  effects of the Act and requires certain disclosures regarding the effect of
the  federal  subsidy provided by the Act. It is effective for the first interim
or  annual  period  beginning after June 15, 2004. Adoption of SFAS No. 106-2 is
not  expected to have a material impact on the Company's post-retirement benefit
obligation.

The  Emerging  Issues  Task  Force  ("EITF") of the FASB issued EITF No. 03-6 on
February 9, 2004. It requires that earnings used to calculate earnings per share
be  allocated  between common shareholders and other securities holders based on
their respective rights to receive dividends. This requirement was effective for
the  second  quarter  of  2004. It had no impact on the Company's calculation of
earnings  per  share.

INFLATION
Inflation  affects  the  cost  of  labor,  products  and  services  required for
operations,  maintenance and capital improvements. While the impact of inflation
has  remained low in recent years, natural gas and propane prices are subject to
rapid  fluctuations.  Fluctuations  in  natural  gas  prices  are  passed  on to
customers  through  the gas cost recovery mechanism in the Company's tariffs. To
help  cope with the effects of inflation on its capital investments and returns,
the  Company  seeks  rate  relief  from  regulatory  commissions  for  regulated
operations  while monitoring the returns of its unregulated business operations.
To  compensate  for  fluctuations in propane gas prices, the Company adjusts its
propane  selling  prices  to  the  extent  allowed  by  the  market.

<PAGE>
CAUTIONARY  STATEMENT
Chesapeake  has  made  statements  in  this  report  that  are  considered to be
forward-looking statements. These statements are not matters of historical fact.
Sometimes  they contain words such as "believes," "expects," "intends," "plans,"
"will,"  or  "may,"  and  other  similar  words  of  a  predictive nature. These
statements relate to matters such as the potential sale of the water businesses,
customer  growth,  changes  in  revenues or gross margins, capital expenditures,
environmental  remediation  costs, regulatory approvals, market risks associated
with the Company's propane wholesale marketing operation, competition, inflation
and  other  matters.  It  is  important to understand that these forward-looking
statements  are  not  guarantees,  but  are  subject  to  certain  risks  and
uncertainties  and  other  important  factors that could cause actual results to
differ  materially  from  those in the forward-looking statements. These factors
include,  among  other  things:

     o    the temperature sensitivity of the natural gas and propane businesses;
     o    the effect of spot, forward and futures market prices on the Company's
          distribution, wholesale marketing and energy trading businesses;
     o    the effects of competition on the Company's unregulated and regulated
          businesses;
     o    the effect of changes in federal, state or local regulatory and tax
          requirements, including deregulation;
     o    the effect of accounting changes;
     o    the effect of compliance with environmental regulations or the
          remediation of environmental damage;
     o    the effects of general economic conditions on the Company and its
          customers;
     o    the ability of the Company's new and planned facilities and
          acquisitions to generate expected revenues; and
     o    the Company's ability to obtain the rate relief and cost recovery
          requested from utility regulators and the timing of the requested
          regulatory actions.


ITEM  3.     QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

Market risk represents the potential loss arising from adverse changes in market
rates  and  prices.  Long-term  debt is subject to potential losses based on the
change  in  interest  rates.  The Company's long-term debt consists primarily of
fixed  rate  senior notes, first mortgage bonds and convertible debentures, none
of  which  was issued for trading purposes. The carrying value of long-term debt
at  June  30,  2004 was $71.5 million, with a fair value of $76.8 million, based
mainly on current market prices or discounted cash flows using current rates for
similar  issues  with  similar  terms  and  remaining maturities. The Company is
exposed to changes in interest rates due to the use of fixed rate long-term debt
to  finance  the  business.  Management  continually  monitors  fluctuations  in
interest  rates  and  debt markets to assess the benefits of changing the mix of
long  and  short-term  debt  or  refinancing  existing  debt.

The  Company's  propane  distribution  business  is  exposed to market risk as a
result of propane storage activities and entering into fixed price contracts for
supply.  The  Company can store up to approximately 4 million gallons (including
leased  storage) of propane during the winter season to meet its customers' peak
requirements and to serve metered customers. Decreases in the wholesale price of
propane  will  cause  the  value  of  stored propane to decline. To mitigate the
impact  of  price fluctuations, the Company has adopted a risk management policy
that  allows  the propane distribution operation to enter into fair value hedges
of its inventory. However, at June 30, 2004 the Company did not have any hedging
contracts  outstanding.

The  Company's  propane  wholesale marketing operation is a party to natural gas
liquids  ("NGL")  forward  contracts,  primarily propane contracts, with various
third  parties.  These  contracts  require  that the propane wholesale marketing
operation  purchase  or  sell  NGL  at  a  fixed price at fixed future dates. At
expiration,  the  contracts are settled by the delivery of NGL to the Company or
the  counter  party  or booking out the transaction. (Booking out is a procedure
for financially settling a contract in lieu of the physical delivery of energy.)
The  propane  wholesale  marketing  operation also enters into futures contracts
that  are  traded  on  the  New  York Mercantile Exchange. In certain cases, the
futures contracts are settled by the payment or receipt of a net amount equal to
the  difference between the current market price of the futures contract and the
original  contract price; however, they may also be settled for physical receipt
or  delivery  of  propane.

The  forward  and  futures  contracts are entered into for trading and wholesale
marketing  purposes.  The  propane  wholesale  marketing  business is subject to
commodity  price risk on its open positions to the extent that market prices for
NGL  deviate  from fixed contract settlement prices. Market risk associated with
the  trading of futures and forward contracts are monitored daily for compliance
with  the Company's Risk Management Policy, which includes volumetric limits for
open  positions.  To  manage exposures to changing market prices, open positions
are  marked up or down to market prices and reviewed by oversight officials on a
daily  basis.  Additionally,  the  Risk  Management  Committee  reviews periodic
reports  on  market  and  the  credit  risk  of  counter-parties,  approves  any
exceptions to the Risk Management Policy (within limits established by the Board
of Directors) and authorizes the use of any new types of contracts. Quantitative
information  on  forward  and futures contracts at June 30, 2004 is presented in
the  following  table.  All  of  the  contracts  mature  within  twelve  months.

<TABLE>
<CAPTION>
------------------------------------------------------------------------
                         QUANTITY       ESTIMATED      WEIGHTED AVERAGE
 AT JUNE 30, 2004       IN GALLONS    MARKET PRICES    CONTRACT PRICES
------------------------------------------------------------------------
<S>                     <C>         <C>                   <C>
 FORWARD CONTRACTS
 Sale. . . . . . . . . 11,592,000   $0.6750 - $0.6925       $0.6592
 Purchase. . . . . . .  7,938,000   $0.6750 - $0.6925       $0.6757

 FUTURES CONTRACTS
 Sale. . . . . . . . .    588,000   $0.6750 - $0.6925       $0.6798
------------------------------------------------------------------------
<FN>
 Estimated market prices and weighted average contract prices are
 in dollars per gallon.
</FN>
</TABLE>


ITEM  4.     CONTROLS  AND  PROCEDURES

EVALUATION  OF  DISCLOSURE  CONTROLS  AND  PROCEDURES
The Chief Executive Officer and Chief Financial Officer of the Company, with the
participation  of  other  Company  officials,  have  evaluated  the  Company's
"disclosure  controls  and  procedures"  (as  such  term  is  defined under Rule
13a-15(e)  and  15d-15(e) promulgated under the Securities Exchange Act of 1934,
as  amended)  as  of  June  30,  2004.  Based  upon  their evaluation, the Chief
Executive  Officer  and  Chief  Financial  Officer  concluded that the Company's
disclosure  controls  and  procedures  are  effective.

CHANGES  IN  INTERNAL  CONTROL  OVER  FINANCIAL  REPORTING
During  the  quarter  ended  June 30, 2004, there was no change in the Company's
internal  control  over  financial reporting that has materially affected, or is
reasonably  likely  to  materially  affect,  the Company's internal control over
financial  reporting.


<PAGE>
                           PART II - OTHER INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS
          The Company is involved in certain legal actions and claims arising in
          the normal course of business. The Company is also involved in certain
          legal  and  administrative  proceedings  before  various  government
          agencies  concerning rates. In the opinion of management, the ultimate
          disposition  of  these proceedings and claims will not have a material
          effect  on  the consolidated financial position, results of operations
          or  cash  flows  of  the  Company.

ITEM  2.  CHANGES  IN  SECURITIES,  USE  OF  PROCEEDS AND ISSUER PURCHASES OF
          EQUITY  SECURITIES

          The  table  below  sets  forth  information  with respect to shares of
          common  stock repurchased by the Company during the three months ended
          June  30,  2004.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                                        TOTAL NUMBER          MAXIMUM NUMBER
                                       TOTAL                             OF SHARES               OF SHARES
                                      NUMBER           AVERAGE      PURCHASED AS PART OF      THAT MAY YET BE
                                     OF SHARES       PRICE PAID      PUBLICLY ANNOUNCED     PURCHASED UNDER THE
PERIOD                               PURCHASED        PER SHARE     PLANS OR PROGRAMS (2)  PLANS OR PROGRAMS (2)
----------------------------------------------------------------------------------------------------------------
<S>                               <C>              <C>              <C>                    <C>
  April 1, 2004
    through April 30, 2004 (1) .            5,882  $       25.4861                      0                      0
  May 1, 2004
    through May 31, 2004 (3) . .                0  $        0.0000                      0                      0
  June 1, 2004
    through June 30, 2004. . . .                0  $        0.0000                      0                      0
----------------------------------------------------------------------------------------------------------------
Total. . . . . . . . . . . . . .            5,882  $       25.4861                      0                      0
================================================================================================================
<FN>
(1)  Chesapeake purchased 5,850 shares of stock on the open market to use for
     the Board of Directors' Stock Compensation Plan. The stock was distributed
     in May, 2004. Additionally, 32 shares were purchased on the open market and
     were added to shares held in a Rabbi Trust to adjust the balance to the
     contractual value.
(2)  Chesapeake has no publicly announced plans or programs to repurchase its
     shares.
(3)  The Company maintains a Rabbi Trust ("the Trust") that holds Chesapeake
     Utilities Corporation common stock, pursuant to a deferred compensation
     plan. The stock in the Trust is recorded as treasury stock. There is an
     offsetting liability that is also recorded in the equity section of the
     balance sheet. In prior periods, these accounts netted to a zero balance.
     In May 2004, there was a distribution of shares from the Trust. As allowed
     by the deferred compensation plan, the recipient elected to have the
     Company withhold shares in an amount equivalent to the participant's share
     of payroll taxes. The Company remitted cash in payment of the participant's
     payroll taxes and continues to hold 9,353 shares in the Rabbi Trust, that
     are not currently offset by a deferred compensation liability. The Company
     has the option of canceling these shares or using them to satisfy future
     deferred compensation commitments.
</FN>
</TABLE>


ITEM  3.  DEFAULTS  UPON  SENIOR  SECURITIES
          None


<PAGE>
ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS
          (a)  The matters described in Item 4(c) below were submitted to a vote
               of stockholders at the Annual Meeting of Stockholders on May 6,
               2004 in connection with which, proxies were solicited in
               accordance with Regulation 14A under the Securities Exchange Act
               of 1934, as amended.
          (b)  Not applicable.
          (c)  Proposals as submitted in the proxy statement were voted on as
               follows:
               i.   The election of Class II Directors for three-year terms
                    ending in 2007, and until their successors are elected and
                    qualified.

<TABLE>
<CAPTION>
-----------------------------------------------------------
                                                 SHARES NOT
NAME               VOTES FOR     VOTES WITHHELD    VOTED
-----------------------------------------------------------
<S>                <C>             <C>           <C>

Ralph J. Adkins     5,098,137       101,222       508,733
Richard Bernstein   5,108,720        90,639       508,733
J. Peter Martin     5,069,637       129,722       508,733
-----------------------------------------------------------
</TABLE>

ITEM  5.  OTHER  INFORMATION
          None

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K
          (a)  Exhibits:
               -    Exhibit 31.1 - Certificate of Chief Executive Officer of
                    Chesapeake Utilities Corporation pursuant to Rule 13a-14(a)
                    under the Securities Exchange Act of 1934, dated August 9,
                    2004
               -    Exhibit 31.2 - Certificate of Chief Financial Officer of
                    Chesapeake Utilities Corporation pursuant to Rule 13a-14(a)
                    under the Securities Exchange Act of 1934, dated August 9,
                    2004
               -    Exhibit 32.1 - Certificate of Chief Executive Officer of
                    Chesapeake Utilities Corporation pursuant to 18 U.S.C.
                    Section 1350, dated August 9, 2004
               -    Exhibit 32.2 - Certificate of Chief Financial Officer of
                    Chesapeake Utilities Corporation pursuant to 18 U.S.C.
                    Section 1350, dated August 9, 2004
          (b)  Reports  on  Form  8-K:
               May  4,  2004 furnishing the Company's earnings press release for
               the  quarter  ended  March  31,  2004  (Items  7  and  12).


<PAGE>

                                   SIGNATURES

Pursuant  to  the  requirements  of  the  Securities  Exchange  Act of 1934, the
registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned,  thereunto  duly  authorized.


Chesapeake  Utilities  Corporation




/s/  Michael  P.  McMasters
---------------------------
Michael  P.  McMasters
Vice  President  and  Chief  Financial  Officer


Date:  August  9,  2004


</TEXT>
</DOCUMENT>
