LUFKIN, Texas, July 20 --

Lufkin Industries, Inc. (Nasdaq: LUFK) today announced results for the second quarter and six months ended June 30, 2005. Sales increased 44% to $121.7 million for the second quarter from $84.5 million for the second quarter of 2004. Net earnings increased 200% to $10.4 million for the second quarter of 2005 from $3.5 million for the second quarter last year. Net earnings per diluted share increased 184% to $0.71 for the second quarter of 2005 from $0.25 for the second quarter of 2004. Prior-period financial data in this release reflect the two-for-one stock split effected in April 2005.

Sales for the first six months of 2005 were $223.1 million, a 46% increase from $153.2 million for the first half of 2004. Net earnings increased 243% to $17.9 million for the first six months of 2005 from $5.2 million for the comparable period in 2004, while net earnings per diluted share increased rose 224% to $1.23 from $0.38.

Douglas V. Smith, president and chief executive officer of Lufkin, remarked, "For the second quarter of 2005, Lufkin again achieved strong profitable growth that exceeded internal expectations. From a macro-economic standpoint, our results reflected high global energy demand, as well as a steadily expanding domestic economy and a resurgence in a broad array of industrial industries. At the company level, our comparable-quarter results have also continued to benefit from substantial volume-driven operating leverage and from greater operating efficiencies as we more effectively meet rapid growth in demand. In addition, continued stabilization in the cost and supply environment has enhanced our ability to price our products to reflect the true material costs we have incurred, allowing margin recovery to levels prior to commodity increases experienced last year. Through a combination of these and other factors, the backlog for each of our business segments has continued to increase on top of significant gains in sales, on both a comparable-quarter and sequential-quarter basis.

"We primarily attribute the expansion of virtually all aspects of our oil field business to strong energy markets. While significant domestic and international demand for new pumping units has remained the main growth engine for this business, our oil field results also reflected the continuation of favorable trends in our oil field automation and services revenues streams and in our foundry operations. As a result, oil field sales increased to $76.2 million for the second quarter, up 47.6% from the second quarter last year and up 21.5% from the first quarter of 2005.

"Lufkin's power transmission business also produced solid results for the second quarter, with growth in comparable-quarter sales of 32.4% accelerating for the third consecutive quarter. Similar to the oil field business, power transmission sales growth was generated throughout the division, from increased demand for both low-speed gears primarily for industrial applications and high speed gears primarily for oil and gas and power generation applications, as well as from repair and retrofitting of existing gears, domestically and internationally. In addition to strong comparable- quarter results, sales of $24.8 million for the second quarter represented 11.5% growth from the first quarter of 2005.

"The trailer division's sales for the second quarter rose to $20.7 million, an increase of 46.0% from the second quarter of 2004 and 25.9% from the first quarter of 2005. Although substantial price increases throughout the trailer market affected some product lines, continuing economic expansion produced firmer demand as the quarter progressed.

"The strength in Lufkin's markets was also reflected in the growth in the Company's backlog, which increased 44.3% to $157.6 million at the end of the second quarter compared with the end of the same quarter in 2004 and which increased 14.2% on a sequential-quarter basis. The oil field backlog of $65.8 million grew 49.5% from June 30, 2004, and 2.4% from March 31, 2005, as we expanded production capacity to improve our response time in the face of rising demand. The power transmission backlog increased 66.3% to $60.2 million at the end of the quarter from the second quarter of 2004 and 13.3% from the end of the first quarter of 2005. The trailer backlog grew 9.1% to $31.6 million from the end of the second quarter last year and 53.8% from the end of the first quarter this year, representative of the impact of increased materials costs on demand in 2004 and the continuing subsequent recovery in demand."

Based on Lufkin's stronger-than-expected financial results for the second quarter of 2005 and its backlog at the end of the quarter, the Company today increased its guidance for earnings per diluted share for 2005 to a range of $2.45 to $2.70 from a range of $1.85 to $2.15. The Company also established its guidance for earnings per diluted share for the third quarter of 2005 in a range of $0.65 to $0.75, compared with $0.35 for the third quarter of 2004.

Mr. Smith concluded, "We have been very pleased with the outstanding response throughout Lufkin to the challenges posed by ramping up our operations to meet substantially higher demand, especially given the period of volatile raw material costs and supply beginning in the second quarter last year. We continue to focus on marketing programs that enhance Lufkin's position as a preferred supplier of support, products and after-market service to our customers. Additionally, we continue to improve productivity and operating efficiencies to meet high demand, and we believe we are increasingly well positioned to leverage the growth momentum evident in our markets."

Lufkin will discuss its results for the second quarter in a teleconference call today at 9:00 a.m. (central time). To listen to the call, participants should dial (913) 981-5532 approximately 10 minutes prior to the start of the call. A telephonic replay will be available from 12:00 p.m. (central time) July 20, through 7:00 p.m. (central time) July 27, 2005, by dialing (719) 457-0820 and entering reservation number 4688845.

This release contains forward-looking statements and information that are based on management's beliefs as well as assumptions made by and information currently available to management. When used in this release, the words "anticipate," "believe," "estimate," "expect" and similar expressions are intended to identify forward-looking statements. Such statements reflect the Company's current views with respect to certain events and are subject to certain assumptions, risks and uncertainties, many of which are outside the control of the Company. These risks and uncertainties include, but are not limited to, (i) oil prices, (ii) capital spending levels of oil producers, (iii) availability and prices for raw materials and (iv) general industry and economic conditions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements and information.

Lufkin Industries, Inc. sells and services oil field pumping units, foundry castings, power transmission products and highway trailers throughout the world. The Company has vertically integrated all vital technologies required to design, manufacture and market its products.

                           LUFKIN INDUSTRIES, INC.
                             Financial Highlights
                    (In thousands, except per share data)
                                 (unaudited)

                            Three Months Ended        Six Months Ended
                                 June 30,                  June 30,
                            2005         2004         2005         2004

    Sales                 $121,689      $84,528     $223,077     $153,157
    Cost of sales           93,666       69,472      172,602      126,071
    Gross profit            28,023       15,056       50,475       27,086
    Selling, general
     and administrative
     expenses               11,589        9,256       22,346       18,589
    Operating income        16,434        5,800       28,129        8,497
    Interest and other
     income (expense), net    (143)        (320)        (213)        (220)
    Earnings before income
     taxes                  16,291        5,480       27,916        8,277
    Income tax provision     5,865        1,999       10,050        3,063
    Net earnings           $10,426       $3,481      $17,866       $5,214

    Net earnings per share:
      Basic                  $0.73        $0.26        $1.26        $0.39
      Diluted                $0.71        $0.25        $1.23        $0.38
    Weighted average
     shares outstanding
      Basic                 14,184       13,498       14,095       13,414
      Diluted               14,607       13,856       14,397       13,765
    Cash dividends per
     share                   $0.09        $0.09        $0.18        $0.18



                           LUFKIN INDUSTRIES, INC.
                           Balance Sheet Highlights
                            (Thousands of dollars)

                                                    June 30,   December 31,
                                                      2005         2004

    Current assets                                  $165,076     $136,336
    Total assets                                     327,358      300,269
    Current liabilities                               53,664       49,105
    Shareholders' equity                             229,981      208,932
    Working capital                                  111,412       87,231



                           LUFKIN INDUSTRIES, INC.
                             Division Performance
                                (In thousands)

                           Three Months Ended         Six Months Ended
                                 June 30,                  June 30,
                            2005         2004         2005         2004
    Sales:
      Oil field            $76,199      $51,619     $138,920      $93,993
      Power transmission    24,800       18,733       47,036       35,871
      Trailer               20,690       14,176       37,121       23,293
        Total             $121,689      $84,528     $223,077     $153,157

                                       June 30,     March 31,    June 30,
                                         2005         2005         2004
    Backlog:
      Oil field                         $65,805      $64,268      $44,004
      Power transmission                 60,167       53,117       36,190
      Trailer                            31,631       20,573       29,003
        Total                          $157,603     $137,958     $109,197