NEW YORK (Bloomberg) — Bermuda-based Frontline Ltd., the world’s second- largest oil-tanker operator, posted an increase in third-quarter profit that missed analyst estimates as more vessels were put in for repair, and forecast a “weaker” fourth quarter.The stock dropped the most in almost six months after the company said net income climbed 34 percent to $98.8 million, or $1.32 a share, from $73.8 million, or 99 cents, a year earlier. Profit was expected to be $118.3 million, according to the median estimate of nine analysts surveyed by Bloomberg News.

Frontline, led by Norwegian billionaire John Fredriksen, placed more vessels into routine maintenance just as demand for shipments was rising from US refineries anticipating disruption caused by hurricanes. The company put seven of its ships into dry dock in the quarter, compared with two a year earlier, losing 311 earnings days.

“Rates were below forecasts due to heavier drydocking in the quarter, which also led to higher operating costs,” Dominic Edridge, an analyst at UBS AG in London, wrote in a report today. Edridge has a “buy 2” rating on the shares.

Shares of Frontline dropped 17 kroner, or 7.1 percent, to close at 222.5 Norwegian kroner in Oslo, the biggest one-day decline since June 8. The stock has fallen 12 percent this year, valuing the company at 16.7 billion kroner ($2.65 billion).

Frontline declared a 67 percent dividend increase to $2.50 a share for the quarter. Chief Executive Officer Bjorn Sjaastad said in a conference call from Oslo that future dividend payouts will be about “100 percent” of earnings per share.

“The fourth-quarter dividend is going to be really low if they stick to the 100 percent payout,” John Kartsonas, an analyst at Citigroup Inc., said by phone from New York.

Average daily earnings on Frontline’s very large crude carriers, or VLCCs, were $59,800 a day in the quarter. The VLCCs of Euronav NV, a Belgian oil-tanker operator, made $69,500 a day. Frontline’s 1 million-barrel oil tankers, known as suezmaxes, earned $40,000 a day. Those of OMI Corp., the second- biggest US tanker operator, made $52,356.

Sales rose 39 percent to $405 million in the third quarter, Frontline said. The company increased its dividend 67 percent to $2.50 a share from the $1.50 a share that it’s been for the past four quarters.

Frontline’s earnings were also hurt because some of its vessels have only one layer of steel separating their cargoes from the ocean. BP Plc, Chevron Corp. and Total SA no longer hire single-hull oil tankers because they carry a greater risk of spillage in the event of an accident. Such vessels are due to be phased out from 2010 with an absolute ban from 2015 under a United Nations-led directive.

“There’s no doubt they have problems with these vessels, and it’s a growing problem due to the fact you are getting closer and closer to the phase-out,” said Rikard Vabo, an analyst at Fearnley Fonds ASA in Oslo. “There’s more pressure on rates for single hulls. Single hulls are trading at a large discount at the moment.”

Frontline’s fleet of single-hull oil tankers made an average of $10,000 a day less than their double-hull ships, Bjorn Sjaastad, said in the conference call.

The number of so-called off-hire days, when Frontline’s ships were undergoing repairs and not making money, increased because one vessel was grounded, Sjaastad said.

The lost-earnings from the grounding are subject to an insurance claim which, once paid, would mean the company’s VLCCs, made to $68,500 a day for the quarter.

The fourth quarter is on course to be the worst for supertanker earnings since 2001, according to data from the London-based Baltic Exchange, which sets the benchmark for hire rates.

“The third quarter of 2006 was stronger than expected, but we have so far seen that the fourth quarter will be weaker,” Frontline said today.

Members of the Organisation of Petroleum Exporting Countries are curbing exports to prop up oil prices, limiting tanker demand. Crude-oil supplies from OPEC members will fall 1.1 million barrels a day this month, according to the Geneva- based consultant PetroLogistics Ltd. OPEC pledged to cut production by 1.2 million barrels a day in October and said it will consider more reductions next month.

`Monitoring Opportunities’

Frontline, which typically hires out vessels on a day-to- day basis, said it’s “actively monitoring opportunities” to lease tankers under so-called long-term contracts with guaranteed day rates. The company said it’s also considering placing bets that future hire rates will decline, without elaborating. No one was available to comment today at Frontline’s Oslo office.

About 260 million barrels of oil were shipped from Middle East ports in August, the biggest-ever one-month loading programme, as refiners stocked up in the middle of the year ahead of expected hurricanes, Paris-based shipbroker Barry Rogliano Salles said.

Frontline said it needs $29,966 a day to break even on each of its VLCCs, and $22,600 on each of its suezmaxes.

Oil consumption will rise 1.7 percent next year, the shipowner said, citing the International Energy Agency. The number of oil tankers now on order at the world’s shipyards equates to 33 percent of the existing fleet, Frontline said.