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(Reuters) - Halliburton Co (HAL.N) said it had tapped BlackRock Inc (BLK.N) for $500 million to help fund drilling in existing shale wells, the first such move by a major oilfield services provider at a time when oil producers are shying away from drilling new wells.
The world's No.2 oilfield services provider, which is buying No.3 Baker Hughes Inc BHI.N to cope with a fall in demand, also reported a better-than-expected profit, helped by cost cuts.
Market leader Schlumberger NV (SLB.N) and Baker Hughes have touted refracking, the practice of fracking existing wells, as means for oil producers to save money. Drilling normally accounts for about 40 percent of the cost of a new well.
"Though a relatively small market today, we see significant runway for refrac in the future," Halliburton President Jeffrey Miller said on a post-earnings call on Monday.
Oil and gas companies have said refracking is still too unpredictable, but some such as Devon Energy Corp (DVN.N) and Chesapeake Energy Corp (CHK.N) are using the technology to revive output from existing wells.
The funding could help Halliburton speed up adoption of refracking, Edward Jones analyst Rob Desai said.
"I think people are wondering why Halliburton themselves weren't providing some of that financing."
Halliburton's shares rose 2.7 percent to $41.05 and Baker Hughes' rose 2.4 percent to $59.70, while the broader U.S. oil and gas index .DJUSEN was down 1 percent.
Halliburton also said it was "fully committed" to buying Baker Hughes, days after the U.S. Department of Justice extended its review of the deal.
The company has put up three drilling businesses for sale to alleviate regulatory concerns and said on Monday it was "pleased with the prices and level of interest" it had received.
Desai said Halliburton tapped the capital market to help it conserve capital given the Baker Hughes deal and the effect of the oil price slump on its own business.
Halliburton's revenue from North America slumped 38.5 percent in the second quarter ended June 30. Revenue from outside the region fell 12 percent.
The company said it expects an "uptick" in activity, including refracking, later this year and a "meaningful recovery" only in 2016.
Halliburton's net profit slumped 93 percent to $53 million in the quarter. Total revenue fell 26.5 percent to $5.92 billion.
According to Thomson Reuters I/B/E/S, the company earned 38 cents per share, higher than analysts' average estimate of 29 cents. Analysts were expecting revenue of $5.78 billion.
Writing by Swetha Gopinath in Bengaluru; Editing by Sriraj Kalluvila and Savio D'Souza