UPDATE 1-Transocean says costs dip in Q1 will not last
* Transocean shares retreat as cost outlook steady
* Ensco says aims to improve on "unacceptable" Q1 downtime
* Ensco outlook positive, shares up 0.9 pct
May 3 (Reuters) - Transocean Ltd topped profit expectations for the first quarter as costs fell on the timing of maintenance and project spending, but it expects those costs to rise sharply this quarter before returning to normal later this year.
Transocean shares rose as much as 4 percent early on Thursday. They were up 1.3 percent at $50.60 in midday trade.
Greg Cauthen, chief financial officer of the owner of the world's largest offshore drilling fleet, stuck with his 2012 operating and maintenance cost estimate of between $6.15 billion and $6.35 billion.
"We expect operating and maintenance costs in the third and fourth quarter to be higher than the first quarter but significantly lower than the second quarter, as our expected level of shipyard activity decreases in the second half of the year," Cauthen told analysts on a conference call.
Excluding one-time items, Transocean earned a first-quarter profit of 68 cents per share, compared with the average 33 cents per share expected by analysts on Thomson Reuters I/B/E/S.
The outperformance was driven almost entirely by the lower costs in the quarter, analysts said.
On the other hand, nearest rival Ensco Plc reported a first-quarter profit just short of expectations, and said the effects of rig downtime had been a particular problem that it expected to improve.
"We are working through these issues and other causes of downtime, such as human error, that added to unacceptable levels of downtime in the first quarter, including some for seasoned rigs that should not be experiencing extended downtime," Ensco Chief Executive Dan Rabun said on a conference call.
Ensco predicted a 6 percent rise in second-quarter revenue from the first quarter. Ensco shares were up 0.9 percent at $55.17.
Separately, Transocean said that, as part of a yearlong ambition to dispose of its older and less-capable shallow-water jackup rigs, it would put its 44 "standard" jackups into an operating unit separate from its other 84 drilling units.
CEO Steven Newman said the company was trying to create "as much of a robust entity as possible" for when it comes time to divest those 44 rigs - a third of them are currently "stacked" and not being actively marketed.
Transocean has already been whittling away at the standard jackup fleet, reducing its size by seven in the past 10 months, including three rigs recently set aside for sale.
Newman had said in late March the company was planning on selling assets worth between $500 million and $1 billion this year.