OSLO (Bloomberg) -- Bermuda-registered Frontline Ltd., the world's biggest oil-tanker company, said second-quarter profit rose to a record as the biggest surge in crude-oil demand for more than two decades boosted shipments and freight rates.

Net income jumped to $169.2 million, or $2.29 a share, from $155.1 million, or $2.04, a year earlier, Oscar Spieler, chief executive of Frontline's operations division, said in Oslo. Sales at the Bermuda-based company, controlled by Norwegian shipowner John Fredriksen, jumped 8.1 percent to $357 million.

``All the indicators point upward,'' Spieler said at a presentation. ``Oil demand will climb the coming months, and based on the high rates we have seen in the second and third quarter, a very nice situation is developing.''

Frontline and Teekay Shipping Corp., the No. 2 tanker operator, are set to report a second year of record profits as a global economic expansion led by China boosts oil consumption. OPEC, the source of a third of the world's oil, is pumping near capacity to curb record prices.

Shares of Frontline rose as much as 8 kroner, or 3.1 percent to 265 kroner, and traded at 261.5 kroner as of 10:18 a.m. in Oslo. They have more than doubled this year, valuing the company at 19.5 billion kroner ($2.9 billion). Teekay, based in the Bahamas, is worth $2.84 billion.

Frontline's operating profit jumped 18 percent to $183.5 million, higher than the $180 million median estimate in a survey of seven analysts by TDN Finans. The analysts had forecast net income of $161 million.

``The numbers were on the positive side compared with market expectations,'' said Arne Egil Roenning, an analyst at Fondsfinans in Oslo, who recommends buying the shares. ``The market outlook is strong for the coming quarters.''

Dividend

Frontline said it plans to pay a dividend of $1.60 a share for the quarter. Fredriksen, 60, Norway's wealthiest individual with an estimated $1.9 billion, according to Forbes magazine, will receive about $56.1 million in second-quarter dividends. Other major shareholders include Fidelity Investments and Neuberger Berman Inc.

Frontline runs most of its ships in the spot market on single- voyage contracts. Tanker rates, measured by the Worldscale standard, averaged WS 110 in the second quarter for cargoes of about 260,000 tons from the Persian Gulf to Japan, according to Bloomberg data. That's up from WS 83 a year earlier. The rate currently stands at WS 115.

Frontline operates 35 very large crude carriers, or VLCCs, each able to carry 2 million barrels of oil, and 19 Suezmax tankers that can haul 1 million barrels each. The company also has eight combination ships that can haul either oil or iron ore.

Income from Frontline's VLCCs rose to $58,500 a day from $46,000 a year earlier, after deducting voyage-related costs such as fuel and port fees. Earnings from Suezmax tankers, the biggest to navigate the Suez Canal with a full cargo, fell to $36,700 a day from $39,600.

In the third quarter, 75 percent of Frontline's VLCC capacity has been booked at $62,000 a day and 65 percent of the Suezmax fleet has won contracts at $38,000 a day, the company said.

OPEC Output

The Organization of Petroleum Exporting Countries pumped an average of 28.7 million barrels a day in the second quarter, according to Bloomberg data. The increase of about 2 million barrels from a year earlier would boost monthly VLCC demand by about 30 units from exporters such as Saudi Arabia and Kuwait.

The gap between tanker supply and demand may remain narrow through 2010 because of growing oil demand and the phasing out of single-hulled tankers, Spieler said. The United Nations shipping agency is pushing to eliminate ships with single hulls to reduce the risk of oil spills.

``If the Frontline management are right in their prognosis, it's probably a mistake not to hold the shares,'' said Jan Eiler Fleischer, who manages the equivalent of $74 million at ABN Amro NV unit Gambak Fondsforvalting in Oslo, and doesn't hold Frontline stock. ``The outlook is very exciting.''

Ship Finance

OPEC raised oil production in July by 1.4 percent to an average of 29.71 million barrels a day, according to a Bloomberg survey. It was the highest since an average of 30.72 million in 1979, according to U.S. Energy Department figures.

In June, Frontline gave shareholders about 25 percent of its Ship Finance International Ltd. unit and had the new company's shares traded on the New York Stock Exchange. Frontline said today it will give another 10 percent of Ship Finance to shareholders next month.

``Shareholders are getting more than $3 per share for the quarter if the Ship Finance stake is added to the cash dividend,'' Roenning said. ``It's pretty good.''

The rest of Ship Finance will probably be sold to other investors or used to pay for acquisitions. Surplus cash created by the transaction may be paid to Frontline shareholders as a dividend. A final decision will be made this year, the company reiterated today.

``Frontline's board is committed to divesting the remaining 63 percent of Ship Finance,'' Tom Jebsen, chief financial officer at Frontline's operating division, Frontline Management, said at the presentation. Part of the stake will probably be offered to institutional investors, he said.

Ship Finance has raised $1.63 billion by selling bonds and borrowing from banks to finance taking over 47 tankers from its parent, which will lease the ships back at a fixed rate. The split is aimed at getting a higher combined value for the two companies than today's Frontline.