So, and we typically use the 50% ratio is where we operationally sit today, so if you want to use that as an approximation, but we’re not ready to officially take up free cash flow. There’s always working capital dynamics and other things that lead to the end of the year and again, if you look at our business profile, the fourth quarter will still be the big quarter to determine the overall cash flow for the year.
Operator: Our next question comes from the line of Daniel Thompson with Exane BNP Paribas. Please go ahead.
Daniel Thompson: Hi, good morning. I had a question on high SIP. Now that the contract has been awarded, and clearly your part of the technology has been qualified with Petrobras, can you talk about the sort of conversations you’re having with that client around using the new technology and other fields, anything specific to flag, and have you had any interest from other clients in Brazil or internationally about using a similar technology?
Doug Pferdehirt: Thank you and good afternoon, Daniel. The answer is yes and yes is the short answer, but I’ll give you a little bit of color around it. Clearly, Petrobras is approaching this as a design one build many, obviously a benefit of being part of this first award, but they clearly see this as an opportunity to reduce the greenhouse gas intensity first and foremost, but also in the case of the Merrill 3 project because it’s in an existing field or a brownfield, if you will, it also allows to debauch that and increase production at the same time, but I don’t want to speak too much on behalf of my clients, but I can assure you Petrobras has stated and very much see this technology as one that they are going to use multiple times.
Interest from other clients, first of all, there were partners in the Merrill 3 project, very well-known large world-class companies as well along with Petrobras. So they’ve obviously been intimately involved and are supportive of the technology and obviously supportive of the project. They provided partner approval for the FID. So we have those who are quite intimately included and I’ll tell you just recently, I travelled actually with a client to Brazil because they wanted to learn more about it. Now they won’t be using it in Brazil. They would be using this type of technology outside of Brazil, but they were so interested and I was more than happy to participate in that visit with them and with the support of Petrobras, we were able to share with them some of the good things that we’re doing and what we’ve done in terms of the development of the technology.
So again, short answer yes and yes.
Daniel Thompson: Thanks, Doug. And if I can squeeze in the follow-up, this time on the surface business, in Saudi Arabia after the Aramco MSC-12 announcement, given the incremental spending, it’s going onshore, unconventional gas from an offshore market where you don’t compete. this seems like an incremental positive for your particular mix in the Middle East, but can you confirm your readiness to respond to that incremental, onshore demand for surface equipment and how does the opportunity in Saudi compare to your expectations for demand before the announcement from Aramco?
Doug Pferdehirt: Sure. And Daniel, maybe just to clarify for everyone, in Saudi Arabia, that business falls under our Surface Technologies business and when we think about wellheads and trees, if they don’t get wet, i.e. if they don’t go below the water surface, then that falls under our surface business. So our business in Saudi Arabia is primarily an onshore business. That’s what we do and actually, we’re very, very good at it. So the reduction in the jack-up market and the reduction in some of the offshore activity, it does affect us because, again, they typically are produced from a production platform, so it’s a dry tree, but the number of wells for the CapEx dollars spent, versus the number of wells that can be drilled for the same amount of CapEx on land, the latter is obviously far greater.
So from our perspective, I’m only answering from our perspective, selfishly, a shift to land CapEx from offshore CapEx is very favourable to our company. Think of it as simple as we sell product that allows a well to be safely and environmentally appropriately produced and so we get paid by the wellbore, if you will, and that’s what matters. In addition, gas is important to us. Our revenue per unit sold is higher in gas than it is in oil. So the shift to gas is favourable and in unconventional gas, we are able to provide additional products around the fracturing and the stimulation side of it as well. So it expands our, let’s say, revenue per well. So that’s how the market works for us. Now more importantly, as you’ve been following the company, we decided to make a strategic investment in Kingdom to bring manufacturing capacity from Asia to the Kingdom.
We continue to ramp up our new facility, and that has gone very successfully. We’ve not yet reached its fullest potential, and we anticipate further improvement in the second half of the year. So Saudi Aramco remains very important to us. The Kingdom is a key contributor to our Surface international business, and we’re very well positioned and quite frankly, some of the announcements have been favorable from our perspective.
Operator: Our next question comes from the line of Saurabh Pant with Bank of America. Please go ahead.
Saurabh Pant: Doug, maybe let’s spend a little time on the quality of the backlog that you’ve been talking about on the Subsea side. I think it’s visible in the results you are delivering, the margins you are delivering, but also the new technology that you’re winning. If you can spend a moment on a phrase you mentioned in your press release, Doug, the heightened focus on project selectivity. How are you doing that? What’s the focus? Is it more about terms and conditions, or are we talking about just integrated projects versus standalone projects?
Doug Pferdehirt: Sure. Great question. We talk about it every day, as we look at the different opportunities that we have in front of us. Look, it’s a combination of all of the above, but let’s start with the main thing that really drives what we would deem as quality, because we believe it, and we’ve demonstrated it’s best for the project in terms of shortening cycle time, accelerating time to first production and it greatly simplifies our execution model, is to Subsea 2.0 configure to order. So clearly, the higher the 2.0 orders, the higher the quality of the backlog and that allows us to go from engineer to order, to configure to order. As I’ve talked about before on this call, that allows us to eliminate nine months of engineering.
