EOG Resources Inc. has been one of the nation's largest independent oil producers for a number of years, but the company's new Dorado dry gas play could make EOG a significant player in the natural gas business as well.

The discovery of the Dorado play in South Texas was announced along with EOG's third-quarter earnings Nov. 5. During the company's earnings call the next day, company officials said Dorado could compete for capital with EOG's top oil plays. Executive Vice President for Exploration & Production Ezra Yacob went into greater detail during his presentation at a recent Bank of America Merrill Lynch conference.

"It's a massive resource," he said. "We think we've been able to capture 20 Tcf net natural gas potential for EOG."

Yacob said the location of the play is another huge benefit for the company as it is near export terminals on the Gulf Coast. The EOG executive declined to say the discovery of Dorado would mean "a pivot back to gas" for the company but said EOG finds itself in an advantageous position with the addition of a low-cost dry gas asset.

"We're seeing some long-term growth in demand for gas, both domestically and in export markets," Yacob said. "What Dorado has really done for us is it's given us a robust option on gas development. It's a very high-quality reservoir."

The combination of existing pipelines in the region and proximity to the Gulf Coast will help drive down costs for Dorado, Yacob said. With the company's experience in the region helping to push costs down further, Dorado could be a solid money-maker, the executive said.

"I think calendar [2021] is looking at [a gas price of] maybe $2.90 [per MMBtu] right now; [calendar] 2022 is probably $2.75 or something like that," Yacob said. "When you apply that to the metrics we're seeing at Dorado, you're talking about a 75% to maybe 100% rate of return. … It's a combination of rock quality and geology."

Shares of EOG have jumped considerably since the announcement of the Dorado play Nov. 5, helped in part by Nov. 9 news of a potential coronavirus vaccine. EOG's stock price on the New York Stock Exchange closed at $35.60 per share the day EOG announced the Dorado discovery; by Nov. 13, its share price had climbed almost 20% to close at $42.67. Between Nov. 5 and Nov. 13, the S&P 500 climbed 2.1% and the S&P Oil and Gas Exploration and Production index gained 16.6%.