Spark Energy Reports "Strong" Unit Margins, Continues SoCal Attrition

Spark Energy saw "strong" unit margins during the quarter ending March 31, 2015, and continued to experience attrition due to its withdrawal from the Southern California gas market, consistent with prior expectations.

Spark Energy was serving 292,000 customers as of March 31, 2015, versus 318,000 as of December 31, 2014.

Gross customer additions during the three months ending March 31, 2015 were 53,000.

At March 31, 2015, Spark Energy was serving 149,000 electric customers, and 143,000 natural gas customers, in comparison to 145,000 electric customers and 173,000 natural gas customers as of December 31, 2014.

Spark lost 32,000 customers in the Southern California natural gas market alone. As previously reported, due to the challenging nature of the dual-billed Southern California natural gas market, Spark Energy ceased marketing to new customers in the Southern California gas market, and previously said that it expects that its more aggressive collection and termination efforts would result in its overall customer base declining during the first quarter of 2015

On a Residential Customer Equivalent basis, Spark Energy was serving 305,000 RCEs as of March 31, 2015.

Spark said that it has already reversed the negative trend it saw in the first quarter, as it ended the month of April at 300,000 customers, or 313,000 RCEs.

Spark's total retail gross margin of $27.9 million in the first quarter of 2015 resulted primarily from a combination of favorable weather conditions along with the lower overall supply cost environment. These conditions resulted in "strong" unit margins for both commodities. The year-ago quarterly retail gross margin had been $17.7 million

Retail gross margin for electricity was $25.65/MWh for the quarter, up from $18.46/MWh a year ago.

Retail gross margin for natural gas was $2.79/MMBtu for the quarter, up from $1.61/MMBtu a year ago.

"Favorable weather across several of our markets in the first quarter was a key driver of these elevated unit margins, as we were able to manage our hedge position to allow us to take advantage of decreasing spot market prices," Spark said

For the first quarter of 2015, Spark Energy Adjusted EBITDA was $10.2 million, compared to Adjusted EBITDA of $9.3 million for the first quarter of 2014

Customer acquisition costs for the three months ended March 31, 2015 were approximately $5.6 million.

Spark Energy CEO Nathan Kroeker said that the company is "actively looking" at other M&A opportunities, having recently announced a transaction to purchase Oasis Energy and also recently having acquired a book of gas customers at Pacific Gas & Electric from Entrust Energy, as previously reported.