Harvest a shiftless sandsponge from along the Nursery coastline. ( -346, -71, -762 ) Copy/waypoint -346, -71, -762 I found mine at -392, -74, -887.
Kill the sandsponge that spawns on the sea floor and attacks you.
Pick up (right-click) the shrumbler hatchling NPC that spawns at its corpse.
Go to ( -122, -51, -735 ) Copy/waypoint -122, -51, -735 and release the shrumbler hatchling from your inventory (right-click). Follow it as it roams around. After around 30 seconds it will respawn as a frustrated shrumbler hatchling. Right click on it and gut it.
If your frustrated shrumbler hatchling becomes bugged and does not offer the 'Gut it' option for the quest update, you can return to the shrumbler caves and reuse the Shrumbler Net to capture a new hatchling - you do not need to delete/restart the quest. Alternatively, wait a few seconds and it may return to the point that you originally dropped it at.