ONEOK Gives Favorable 2012 Guidance

ONEOK Inc. (OKE - Analyst Report) provided financial forecasts for fiscal 2012. The net income of the company for 2012 is expected to be in the range of $355 million to $400 million, an estimated growth of 13% from the current 2011 earnings guidance of $325 million to $345 million.

The strong performance in 2012 is expected to come in from ONEOK Partners (OKS - Analyst Report) and from natural gas distribution segments, both projected to grow from the prior year.

ONEOK Partners' results in 2012 are expected to be driven by increased natural gas gathering and processing volumes and higher natural gas liquids (NGL) volumes gathered and fractionated in the NGL business. These positives are partially to be curbed by lower NGL optimization margins resulting from lower optimization volumes and narrower NGL price differentials at this business.

The natural gas distribution segment at ONEOK is expected to benefit from higher margins from rates activity not realized in 2011. The Energy Services segment would however remain in line with the previous year.

The company estimates cash flow from operations (at the midpoint) before changes in working capital to be $746 million for 2012. It further has plans to increase the dividend payment rate subject to the board’s approval.

Our Take

ONEOK provided us with a mixed show in the first two quarters of 2011. First quarter results were lower than the year-ago performance due to lackluster activity at the Energy Services and Natural Gas Distribution segments. However, things turned around in the second quarter when the results surpassed year-ago figures solidly backed by ONEOK Partners.

We believe strong segment trend will continue into 2012, yielding improved performance. The company’s intention to boost long-term shareholder value, as exemplified by the 4-cent semiannual dividend hike, albeit subject to approval, is appreciable.

The Zacks Consensus Estimates for third-quarter fiscal 2011, fiscal year 2011 and fiscal year 2012 are currently pegged at 54 cents, $3.16 and $3.55, respectively.

We maintain our long-term Neutral recommendation on ONEOK shares, supported by a Zacks #3 Rank, which translates into a short-term Hold rating.The company’s primary competitors include Dynegy Inc. (DYN - Analyst 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.

Read the full analyst report on OKS

Read the full analyst report on DYN

Read the full analyst report on OKE

Read the full analyst report on OGE