LONDON (Bloomberg) — Bermuda-based Frontline Ltd., the world's biggest oil-tanker company by carrying capacity, said first-quarter profit fell 26 percent after ship-hire rates dropped because of OPEC production cuts and the warmest winter on record.Net income declined to $158.8 million, or $2.12 a share, from a restated $214 million, or $2.86 a share, a year earlier, Frontline said yesterday in a statement to the Oslo Stock Exchange. That beat the $100.3 million median estimate of 10 analysts surveyed by Bloomberg.

"Underlying trading looks a bit better than we expected," said Robin Byde, an analyst for HSBC Securities in London who has an "underweight" recommendation on the shares. Earnings "look like a small positive," he said in an interview.

December to February was the warmest winter period on record, according to the US National Oceanic and Atmospheric Administration, lowering refinery demand for crude oil. Tanker bookings also were curbed by the 1 million-barrel-a-day output cut that members of the Organisation of Petroleum Exporting Countries started implementing in the fourth quarter of 2006.

Shares of Frontline fell 5.5 Norwegian kroner, or 2.1 percent, to 255 kroner as of 11.37 a.m. in Oslo, valuing the company at 19 billion kroner ($3.2 billion). They have climbed 37 percent this year.

The profit included a $39.8 million gain from the sale of shares in Sea Production Ltd., a company that converts ageing tankers into storage-and-production ships. Stripping out that gain, profit still beat analysts' estimates by $18.7 million.

Frontline deferred a gain of $155 million from the sale of shares of another company, Sea Lift Ltd., which will convert tankers to transport oil rigs, rig parts, bridges and other ships. Sales fell 25 percent to $362 million.

The profit decline was Frontline's first in three quarters. It reported a 0.6 percent increase in earnings in the fourth quarter after selling two vessels for gains of $73.2 million.

Frontline declared a cash dividend for the quarter of $1.50 a share. The payout is "slightly disappointing" and "explains part of the reason" why the shares fell today, said Arne Roenning, an analyst for Fondsfinans AS in Oslo, adding that a broader sell-off on the Oslo stock exchange was also a cause for the stock's decline.

Earnings from Frontline's very large crude carriers, or VLCCs, slumped 31 percent to $50,200 a day while those from its 1 million-barrel carriers declined 29 percent to $34,900 a day. Break-even levels are $29,500 and $22,000 a day respectively.

[bul] Bermuda-based Ship Finance International Ltd., an oil-tanker owner that leases vessels to companies controlled by Norwegian billionaire John Fredriksen, said profit climbed 63 percent after gains on the sale of ships by affiliated company, Frontline Ltd.

Net income climbed to $55.3 million, or 76 cents a share, from $33.9 million, or 46 cents, a year earlier, Ship Finance said in a statement distributed by Hugin. The profit included a $30.8 million gain from the sale of six oil tankers.