Austal Ltd (ASX:ASB) saw its stock price surge 5.04% in intraday trading on Wednesday following the announcement of a crucial agreement with the US Navy. The company has successfully resolved its request for equitable adjustment (REA) concerning the Towing, Salvage, and Rescue Ship (T-ATS) program at its Alabama shipyard.

The T-ATS program, initially awarded in September 2021 as Austal's first US Navy steel vessel contract, had faced significant challenges. Originally valued at $145 million for two ships, it expanded to a $380 million contract for five vessels. However, the program encountered major delays due to late technical data and design issues, leading Austal to file an REA in November 2024.

Under the new agreement, the US Navy has decided to permanently pause the construction of T-ATS 14 and T-ATS 15, effectively reducing the contract from five to three vessels. Despite this reduction, Austal stated that there would be minimal change to the overall contract value. Importantly, the company does not expect the REA resolution to affect its revenue or earnings, as no contingencies were held as of June 30. This positive outcome, aligning with prior provisions and expectations, appears to have boosted investor confidence in Austal's financial stability and operational efficiency.