Peter Costa: This is Peter Costa on for Brett Linzey. So there’s really impressive growth in the Middle East and Africa. Are you guys seeing any emerging risk or throttling back of future activity in the region given the current geopolitical environment?
Scott Rowe: It’s a good question. It’s something that we’re watching very closely. And so geopolitics today is a little bit of a wildcard, right? We still have war in Ukraine with Russia. We’ve got the Middle East now with lots of concern with Israel and Palestine. So it’s just something that we’re watching. I’d say any conflict drives uncertainty and so I’d say it’s not a net positive. However, given kind of where things are and what’s going on in the world, we remain confident that the projects that we have visibility to in Saudi Arabia, in the UAE, in Qatar that those continue to progress forward. And so I think there’s always an element of geopolitical risk in our business, given the significant international exposure that we have. But again, today, we feel confident in our projections, in our plans given everything we know and that we’re watching in the world.
Peter Costa: And then you also noted that 100 basis point impact of noncash adjustments to the long-term liabilities. I’m just curious if you’d potentially move that out of the adjusted results moving forward?
Amy Schwetz: It’s certainly something that has been presented to us by a number of the analysts. We’ve tried to be consistent from year-to-year in terms of how we presented this. But obviously, as we start each new year, we think about how we take a look at these things. And it’s certainly something that we’ll consider going forward. Obviously, what we hope is to avoid charges of this size going forward. And when we’ve not adjusted it, we intend to be transparent about what those have been.
Operator: We go next to Nathan Jones with Stifel.
Nathan Jones: I guess I’ll ask my second question first seeing that it’s a follow-up to the last one. There’s a pretty well-defined playbook for getting those liabilities off the balance sheet. Several other companies have done it. Now that you have a little bit more flexibility in the balance sheet, what are your thoughts about actually moving that liability off the balance sheet, so we don’t have to worry about these charges anymore.
Amy Schwetz: So it’s certainly something that we continue to monitor and talk about internally. The liability is an undiscounted liability that we have on our balance sheet. We also have a receivable that partially offsets it. So the net size of the liability is about $60 million. We believe it’s manageable. Many transactions that have been executed around liability management have been much larger than that as we look at what’s happened in the market. So as we think about this, it’s the same decision that we’re making around capital allocation for other opportunities, where is the greatest long term return to our shareholders. And currently, given the way our legal team has been able to manage this liability and the insurance proceeds that we’ve received to date to net against this, we viewed higher and better uses for capital allocation, but that will continue to be under consideration.
Scott Rowe: We’ll look at it every year and make the best decision at the time that we can.
Nathan Jones: Second question I wanted to ask about is the visibility on the project pipeline. Scott, you’re talking about a number of these large projects and EPC backlogs and certain things moving into the FID stage. And so I think that Flowserve’s visibility is pretty good here. I mean once projects get into EPC backlogs, they’re pretty much going to be executed on. And once they get to being awarded to Flowserve they pretty much always get executed on. The projects behind that, the ones that haven’t got to FID out are the ones that are probably more at risk in your pipeline. If we think about how far away they are — like is that a year from now that we might see some disruption if we assume the market turns down, is it two years away that we might see some disruption if the market turns down? Just maybe you can give some more color around your visibility into that pipeline and your level of confidence that those get executed on?
Scott Rowe: No, I think that’s a really good point, Nathan, and I’ll kind of reiterate some of the things that you said. And so if we think about, let’s just call it our near term pipeline one year out. Why do we have confidence in that? We’ve got our own internal funnel and opportunities. We know these projects have passed FID, and they’re now showing up with orders within the EPC backlog. And I’ll just — from a historical perspective, once you get FID and once you see it in the EPCs, very, very rarely will you see a project stopped or canceled unless something dramatically goes wrong. And so we have very good visibility in our one year funnel in terms of larger projects and outlook. I would say beyond the one year mark that’s when you start to see some uncertainty that could be driven by cost inflation or interest rates in terms of how they lever up some of these projects and project financing or potentially some of the geopolitical risks, which we referenced earlier.
On the positive side, though, again, we’ve had substantial underinvestment, we’ve got in market pricing on the oil and gas side that is incredibly constructive and we also have the dynamic of energy security and energy transition. And so very similar to my comments a month ago at the Investor Day, like we still feel really good about that long term view of activity around the world, given the dynamics of energy security and energy transition.
Operator: And this does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time.
