Relatively modest levels of liquefied natural gas (LNG) imports to the U.S. over the last two years have “lulled investors to sleep,” and imports this year could be “up dramatically” if natural gas prices are $5 or more, analysts at Raymond James & Associates Inc. said this week.

In their “Stat of the Week” the analysts outlined thoughts from the firm’s institutional investors conference last week. They didn’t miss the opportunity to point out that their two-year-old bearish outlook for gas has finally taken hold among the financial community.

“At this year’s conference there was widespread agreement with our thesis that $5/Mcf U.S. natural gas will remain the norm for years to come, though there are many views on what happens in the long run (2013+),” wrote J. Marshall Adkins and Pavel Molchanov.

Whether $5 gas stays around forever, “or just a very, very long time,” the analysts said five bucks is enough to grow domestic production. However, the firm’s informal survey of exploration and production executives, along with those of oilfield services companies, showed that they think $5.76 is necessary to grow production.

While the Raymond James team thinks 900 rigs is enough to grow production, the executives polled indicated that 1,124 were needed. There was even greater disagreement between executives and the Raymond James team over the significance of increased LNG imports.

“…[W]hile just about everyone understands that domestic gas supply is a big problem for the market, only about a quarter of our survey’s responses expressed concern about liquefied natural gas,” they said. Also this week, analysts at Bank of America Merrill Lynch said they expect an increase in LNG imports (see related story).

Perhaps they’ve been blinded by the shale. “In light of Wall Street’s obsession with companies’ ability to post high production growth, much of the discussion centered on actual returns from these [shale] plays…if there are returns at all in the current environment,” the analysts said.

They pointed out that while some producers have claimed that their shale plays make a 10% return when gas is at about $4/Mcf, the finding and development costs cited by the companies typically exclude acreage costs or overhead such as general and administrative costs.

“While many may argue these acreage costs are a sunk cost for operators that have already amassed large land positions, what about new entrants to the shales or veterans trying to build a new position in an increasingly hot play like the Marcellus [Shale] where one recent transaction exceeded $14,000 per acre?” they asked. “While we forecast a number of best-in-breed operators can continue to make good returns in shales at current prices, we believe we’ll see an increased focus on drilling for oil versus gas (even as the gas rig count grows steadily).”

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