Even with some robust quarter-over-quarter production growth, particularly in crude oil and natural gas liquids (NGL), Rapid City, SD-based Black Hills Corp.’s oil/natural gas operations continued to operate in the red, reporting small losses Wednesday for both the 2Q2014 and first half of the year.

Continued strong performance from its combination utility operations in several states allowed the energy holding company to report increased profits for both periods, compared to similar periods last year: $19.8 million, or 44 cents/share, and $67.9 million, or $1.52/share, for the second quarter and first six months this year, respectively, compared to $18.3 million, or 41 cents/share, and $56.6 million, or $1.28/share, for the same respective 2013 periods.

“With continued production increases and price declines [for both oil and gas], our 2Q2014 oil and gas revenue was flat [at $10 million] compared to the first quarter, and a $500,000 improvement in the amount of the loss is due to lower operating and maintenance costs,” according to CFO Tony Cleberg.

While NGLs, crude oil and gas production increased 97%, 41% and 3%, respectively in 2Q2014, Black Hills still recorded a $1.7 million loss, compared to a $2 million loss the same quarter last year. The loss for the first six months of the year was $2 million, compared to being $1.7 million in the red for the same 2013 period.

Despite the continuing red ink, CEO David Emery said Black Hills’ oil/gas assets “offer substantial value upside, so from a strategic standpoint, we plan to prove up and capture the value of [our] existing oil/gas properties, and also continue to pursue some disciplined oil exploration, primarily plays that have impactful reserve potential [Piceance and San Juan Basins’ Mancos Shale plays].”

Emery said Black Hills in 2014 is concentrated on its Piceance Mancos drilling program where it plans to drill and complete six wells this year, two of which already have been drilled, along with another six wells next year. At the end of 2015, the company will assess its options, including joint ventures, selling properties, establishing gas reserves in a supply program for the company’s utilities, and several others, he said.

“Before that, we really need to complete the 12 wells to get a better handle on the potential value of those properties.”

In response to several questions from analysts on the lagging oil/gas operations, Emery reiterated that there have been no changes in plans. He is still pointing for the end of next year to have enough data from the wells now being planned to “feel totally comfortable with the repeatability of the results — both the cost of the production and ultimately the production and reserves.”

Emery stressed that management is “feeling very confident about the progress we are making, feeling we will get more and more efficient in our drilling completion work, but with a play as large as this it will take awhile to get that established.”

So far from the early results of the first two wells, Emery said the results are fitting the production profiles that Black Hills has for the play. In generally, Black Hills has extended the length of its laterals (9,000-10,000 feet) and is now applying hydraulic fracturing to every 250 feet on the lateral, he said.