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ONEOK Inc. (OKE - Analyst Report) entered into an agreement with Barclays Capital, a wing of Barclays Plc (BCS - Analyst Report), to buy back $300 million of its shares. The company decided to repurchase 4.3 million of its shares from Barclays Capital at $69.08 per share, the closing price on May 17, 2011. The company will then immediately retire 85% of the shares repurchased from Barclays.

The buyback will be funded by ONEOK's cash balance and from short-term borrowings. The balance of cash and cash equivalents at the company as of March 31, 2011 was $0.87 billion, while retained earnings of the company as of March 31, 2011 were $1.90 billion.

The repurchase of shares is a part of a three-year program that allows ONEOK to buy back shares worth $750 million. The program has a ceiling, fixed at $300 million, in any calendar year. The program is scheduled to expire with the repurchase of $750 million of common stock or on December 31, 2013, whichever is earlier.

The company remains focused on rewarding shareholders through share buyback as well as dividend payments. In May 2011, the company paid a quarterly dividend of 52 cents per share.  Also, ONEOK plans to increase dividends by 4 cents per share semiannually in 2011, subject to approval of its board of directors.

ONEOK's first quarter earnings per share fell below the Zacks Consensus Estimate, mainly due to lower realized seasonal natural gas price and higher amortization and depreciation costs. The Zacks Consensus Estimate for 2011 is pegged at $3.22 per share.

We maintain our long-term Neutral recommendation on ONEOK shares, supported by the company’s short-term Zacks #3 Rank (Hold). The company’s primary competitors include Dynegy Inc. (DYN - Snapshot Report) and OGE Energy Corp. (OGE - Analyst Report).

Based in Tulsa, Oklahoma, ONEOK Inc. is a diversified energy company, operating as a natural gas distributor primarily in the United States.

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