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ONEOK, Inc. (OKE - Analyst Report) announced that it has completed repurchase of its shares worth $150 million from Goldman, Sachs & Co., a unit of The Goldman Sachs Group, Inc. (GS - Analyst Report). The company has repurchased 3.4 million shares from Goldman, Sachs & Co. at an average price of $44.11 per share.

In October 2010, the board of directors of ONEOK authorized a 3-year stock repurchase program, worth $750 million, subject to the limitation that share repurchases will not exceed $300 million in any calendar year. This buyback program will either end on December, 31, 2013 or when shares worth $750 million will be repurchased, whichever is earlier. Under this program, the company completed repurchase of $300 million of common stock in August 2011.

The repurchase of shares worth $150 million fulfills the quota allotted in a calendar year. In June, 2012, ONEOK repurchased 3.6 million shares for $150 million from Goldman, Sachs & Co.

In both 2011 and 2012 stock repurchase transactions, ONEOK has utilized its available cash and short-term borrowings. We know that the company ended the second quarter of 2012 with cash balance of $114.9 million.

In addition, the company also plans to strengthen its liquidity portfolio by increasing its credit facility level to $1.7 billion from $1.2 billion. Strong liquidity position enables ONEOK to follow continuous stock repurchase strategy.

We also know that ONEOK continues to create shareholder value through share repurchase and payment of dividends to its shareholders. The company plans to raise its dividend by 40% between 2012 and 2014. On July 25, 2012, the company increased its quarterly dividend to 33 cents per share from 30.5 cents per share.

Apart from stock repurchase and dividend hike, we believe ONEOK’s future financial results will be boosted from steady progress at its growth projects and deployment of $1 billion in additional projects. In addition, the company will be able to make acquisitions that complement and strengthen its existing businesses, given its strong balance sheet and liquidity position.

During second-quarter 2012 earnings call, ONEOK lowered its net income guidance for 2012 to a range of $345 million to $375 million from the prior range of $360 million to $410 million. As per the Zacks Consensus Estimate, ONEOK’s third-quarter and full-year 2012 earnings are expected to be 32 cents and $1.69, respectively.       

However, we are skeptical about volatile credit markets, strict utility regulations, dependence on weather patterns and unpredictable commodity prices.

Tulsa, Oklahoma-based ONEOK Inc. is a diversified energy company, operating as a natural gas distributor, primarily in the U.S. ONEOK Inc. currently retains a Zacks #3 Rank (short-term Hold rating).

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