Antero Resources Corp. gained additional access to export markets for its natural gas liquids during the first quarter, which significantly boosted its free cash flow in a trend that’s expected to continue this year as it ramps-up shipments bound for overseas markets.

Partial service finally started on Mariner East (ME) 2 as the quarter got underway, allowing anchor shipper Antero to send nearly 30% of its Appalachian NGL volumes to the Marcus Hook Industrial Complex near Philadelphia for export. The company realized a 17 cent/gallon premium to Mont Belvieu pricing on its Marcus Hook volumes.

Sunoco Pipeline LP in late December started limited service on ME 2 with a smaller converted pipeline that once moved refined products after Pennsylvania regulators halted work on a stretch of the mainline when sinkholes formed near it last year. Antero, the nation’s largest NGL producer, said it expects to move 50% of its liquids on the line for export through the remainder of the year.

The company has 50,000 b/d of firm capacity on the system and has the option to double that. Overall, about 145,000 b/d are moving on the system. If more of ME 2’s designed 275,000 b/d capacity comes online, Antero said it would increase its shipments. CEO Paul Rady said the price uplift helped increase the company’s cash flow by $20 million during the first quarter.

“I think we feel really good about the NGL markets, and think that's going to continue to strengthen, and so that makes up for softness in gas in the near term,” added CFO Glen Warren during a call with analysts last week to discuss first quarter results.

Antero produced 3.099 Bcfe/d during the first quarter, up 30% compared to last year and down slightly from 3.2 Bcfe/d in 4Q2018. While ME 1 in Pennsylvania was offline for most of the first quarter after it was shut down to address another sinkhole that formed near it, limiting additional NGL transport, Antero rejected ethane into the gas stream on weak prices. That cut 50 MMcfe/d of production for the period.

The company still gained on the operational front, however, as it reported more efficiencies. Antero drilled an average of 5,300 feet per day during the quarter, and set what management believes is a world record for a horizontal well by drilling 9,184 feet of lateral in 24 hours. Such efficiencies have allowed management to cut back to four drilling rigs and three completion crews for the rest of the year from previous activity levels of five rigs and four crews. While its full-year production guidance range of 3.150-3.250 Bcfe/d remains unchanged, the company slashed its drilling and completions budget by about 3% to $1.3-1.375 billion.

Antero’s average realized first quarter price, excluding hedges, increased 3% year/year to $3.65/Mcfe. Including hedges, the company’s average price was $4.00/Mcfe, down by 1% compared to the same time last year.

Year/year NGL production increased 44% to 148,003 b/d and accounted for 35% of total produce revenue before hedges. Revenue came in at $1 billion for the first quarter, or the same as it was in 1Q2018. Revenue included a $174 million non-cash loss on unsettled commodity derivatives. 

Antero reported first quarter net income of $979 million ($3.17/share), compared to net income of $15 million (5 cents) in the year-ago period. The company completed a transaction in March to simplify its corporate structure, and Antero Midstream Partners has since been deconsolidated from its results.