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LNG has been around for years; Japan relies upon it for almost all of its gas needs. However, North American reserves have always enjoyed a significant cost advantage so LNG has only been nominally imported for the past 30 years. Historically, the U.S. has relied upon Canadian imports to cover the supply/demand gap, but with Canadian imports expected to slow, LNG will be needed to fill that gap. We don't, however, expect to LNG to make a major splash domestically until 2008-2009 when the next wave of regasification terminals, like the ones being built by Cheniere Energy LNG and Sempra SRE, begin importing LNG. Although LNG could displace high-cost domestic producers, we think that it should improve the reliability of supply--helping to stabilize gas prices near our midcycle price, rather than creating a glut of low-cost gas.

Some natural-gas bears point to declining industrial demand as a catalyst for lower prices. Industrial firms who consume large quantities of natural gas like the chemical and aluminum industry are concentrating new capacity in areas like Trinidad and the Middle East, where reserves are plentiful and prices are cheap. But, declining industrial demand is more of a long-term issue for a couple of reasons. One, there are long lead times required to build new facilities. Two, there is a significant amount of capacity in the United States, and despite robust gas prices these facilities remain competitive at prices well above historical levels due to transportation costs.

Natural gas also faces pressure on the electrical generation front from coal and nuclear energy; both are viable long-term substitutes. The biggest problems facing these two fuel sources is the environmental concerns and high up-front capital costs for new plants. Consequently, we don't see coal and nuclear taking meaningful share away from natural gas for the next few years. Like industrial facilities, there are a plethora of natural-gas fired electricity plants, see Calpine's CPNLQ build out in the early part of this decade. These facilities could be restarted in the event natural-prices were to fall significantly, which further shapes a price floor for natural-gas prices.

Over the long run, other supply and demand issues may materialize, but from what we can see today, natural-gas prices should remain strong for the foreseeable future.

The change in our natural-gas price assumptions had a positive effect on our fair value estimates for several companies in our coverage universe. As a result, there is a handful of stocks trading below or near our "consider buy" prices. Here are five energy stocks to keep on your radar screen:

Devon Energy DVN

Analyst: Justin Perucki

Fair Value Estimate: $80.00

Consider Buy: $61.70

From the Analyst Report: Devon has an eclectic group of assets. The 2003 merger with Ocean Energy made Devon one of the five largest leaseholders of promising deep-water Gulf of Mexico properties. A 2001 acquisition added large tracts of western Canada, including the largest gas holding in the untapped Mackenzie Delta. Although much of North America's gas deposits are mature, Devon's deep-water and Mackenzie Delta properties are still in their infancy. Even the company's developed reserves have a lot of life left in them. Devon is the largest producer in the still-prodigious Barnett Shale deposit in Texas.

Whiting Petroleum WLL

Analyst: Justin Perucki

Fair Value Estimate: $51.00

Consider Buy: $39.30

From the Analyst Report: Without deep pockets to fund large-scale exploration