GR shares slump as it confirms potential profit hit

GR Engineering Services has emerged from an ASX suspension today to disclose that its bottom line will likely be impacted by two major subsidiaries of its client Northern Oil & Gas Australia going into administration last month.

Shares in GR Engineering, which operates Northern Oil's Northern Endeavour vessel, were down 10.3 per cent to trade at 78 cents each 1.20pm AEST.

GR Engineering told the ASX it estimates its exposure to its contract with subsidiarity Timor Sea Oil & Gas Australia (TOGA), which is now in administration, is around $17.4 million.

This is comprised of receivables and work in progress ($15.9 million) and the finalisation of commitments to vendors and suppliers ($1.5 million).

The contractor said it holds security of over the title of two of TOGA’s production liceneses, and ranks on equal footing with its senior secured lender for an amount of up to $14.5 million.

“In light of the above, there may be an adverse impact on the profitability of GR Engineering in the half year esults to 31 December 2019,”  GR Engeering said.

On September 20, Timor Sea Oil and Gas Australia Pty Ltd and Northern Oil and Gas Australia Pty Ltd were placed into administration, and on the same day GR Engineering went into a trading halt.

Northern Oil owns the Northern Endeavour vessel, which operated in the Timor Sea.

The vessel was ordered to halt operations on July 10 by the National Offshore Petroleum Safety and Environmental Management Authority, due to structural corrosion concerns.

It is currently moored and operated by Upstream Production Solutions, which is a subsidiary of GR Engineering.