LONDON (Bloomberg) - Frontline Ltd., the oil-tanker business led by Norwegian billionaire John Fredriksen, posted a 50 percent gain in fourth-quarter profit after asset sales and as higher oil production buoyed demand.

Net income rose to $202.3 million, or $2.70 a share, from $134.6 million, or $1.80, a year earlier, Hamilton, Bermuda-based Frontline said in a statement distributed by Hugin yesterday. That beat the $136.4 million median estimate of eight analysts surveyed by Bloomberg. The quarterly dividend is $2 a share.

"The numbers are very positive and they also announced a bigger dividend than I had expected," Anders Karlsen, an analyst at Nordea Securities in Oslo, who recommends buying the shares, said by phone yesterday. Daily rental rates for Frontline's tankers were "also very strong compared to peers," he said.

Rising crude oil output by the Organisation of Petroleum Exporting Countries, supplier of more than 40 percent of the world's oil, and the world's worst spill in four-and-a-half years boosted demand for double-hull tankers at the end of the year. That triggered the fastest two-month increase in tanker rental rates in at least 16 years.

Frontline climbed 12 kroner, or 5 percent, to 253 kroner as of 10:48 a.m. in Oslo, valuing the company at 19 billion kroner ($3.5 billion).

Frontline posted a $144 million gain from asset sales, including a stake in Dockwise Ltd., a company that hauls oil-rig parts, and Imarex NOS ASA, a freight derivatives broker. There were also gains from ship sales.

The average daily earnings for Frontline's very large crude carriers, or VLCCs, dropped four percent to $45,700 a day. Its suezmax tankers, which have about half the shipping capacity of VLCCs, earned six percent more than last year, making $33,100 a day.

That beat the $34,300 a day and $34,400 that Euronav NV, Belgium's only publicly listed oil-tanker owner, said its VLCCs and suezmaxes made in the same period.

Frontline has its entire fleet of single-hull VLCCs on so- called time charters earning fixed daily fees that are not influenced by the day-to-day ship-rental market. The "majority" of its double-hulled vessels are trading in the single voyage, or spot, market where rates fluctuate, the company said.

The shipping line said it has $1 billion invested in ships that are on order or under construction at shipyards in Asia. It paid $104 million toward those contracts and will pay another $93 million in the first quarter. Frontline will then draw down 80 percent of the finance costs, it said, without saying when.

The values of those newbuilding contracts are "significantly higher" than "market values," it said.

According to Karlsen at Nordea, the average price of Frontline's on-order VLCCs is about $103 million, compared with an average market price of $142 million for such vessels, according to data from Oslo-based shipbroker Fearnleys AS.

The average order price of its suezmaxes is about $70 million compared with a present-market price of $88 million for such ships, according to Fearnleys.

Frontline estimates about 36 VLCCs will be converted to become iron ore transporters this year and about 4 will switch to become oil storage and production ships.

Demand for double-hull tankers climbed after the Hebei Spirit had South Korea's worst-ever oil spill in December when it was struck by a crane.

The breakeven cost for each of Frontline's VLCCs increased 4.6 percent to $31,400 a day, compared with what Frontline said on November 15. Suezmax breakeven costs climbed 1.8 percent to $22,500 a day.

Slower growth in the US, the world's largest energy user, may mean forecasts for global oil demand this year are "too optimistic," Frontline said in the statement.

OPEC has raised production for five consecutive months, according to Bloomberg estimates.