Company Press Release

Lufkin Industries Reports Fourth-Quarter Earnings of $1.03 Per Diluted Share

Increased Bookings Generate 35.4% Growth in Sales and 29.2% Growth in Backlog

Establishes 2006 Earnings Guidance in a Range of $3.50 to $4.00 Per Diluted Share

LUFKIN, Texas, Feb. 9 --

Lufkin Industries, Inc. (Nasdaq: LUFK) today announced results for the fourth quarter and twelve months ended December 31, 2005. Sales for the fourth quarter increased 35.4% to $145.4 million from $107.4 million for the fourth quarter of 2004. Net earnings rose 253.8% to $15.4 million from $4.3 million. Net earnings per diluted share were $1.03 for the fourth quarter of 2005, an increase of 232.3% from $0.31 for the fourth quarter of 2004.

Sales for 2005 increased 38.1% to $492.2 million from $356.3 million for 2004. Net earnings grew 209.0% to $44.5 million from $14.4 million. Net earnings per diluted share increased 191.3% to $3.03 for 2005 from $1.04 for 2004. Prior-period financial data in this release reflect the two-for-one stock split effected in April 2005.

Douglas V. Smith, president and chief executive officer of Lufkin, remarked, "Lufkin's profitable growth for the fourth quarter and throughout 2005 primarily reflected strong domestic and international energy markets, as well as steady expansion in the U.S. economy. For both the quarter and the full year, we experienced increased sales and backlog for each of our three businesses from the comparable period in 2004. This growth, and a more stable cost and supply environment than we experienced in 2004, produced increased operating leverage, which more than offset the inherent inefficiencies associated with expanding production capacity to meet high demand. As a result, our net profit margin increased to 10.6% and 9.1% for fourth quarter and full-year 2005, from 4.0% for both the fourth quarter and full-year of 2004, and we completed 2005 better positioned to meet continued growth in demand during 2006.

"As expected, our fourth-quarter results reflected the impact of delayed product shipments in the third quarter due to Hurricanes Katrina and Rita. We estimated the storms reduced sales and increased backlog for the third quarter by approximately $5 million. Our fourth-quarter results include an increase in sales and reduction in backlog from the shipment of these products.

"Oil field sales for the fourth quarter of 2005 increased 42.4% to $92.3 million from the same prior-year quarter, while growing 21.7% from the third quarter of 2005. This increase was driven by continued strong demand in virtually all our markets, not only in our core oil field equipment business, but also in our automation and services businesses. By expanding pump production capacity in the U.S., as well as in Canada and Argentina, we have also positioned Lufkin to respond to opportunities in other international markets. While our backlog increased 9.5% to $67.5 million at the end of 2005 from the end of 2004, we were successful in using our expanded production capacity to reduce the backlog 7.2% from the end of the third quarter of 2005, thereby returning order-to-shipment cycles to targeted levels.

"Power transmission sales increased 42.5% to $34.4 million for the fourth quarter of 2005 from the fourth quarter of 2004 and 37.0% from the third quarter of 2005. Consistent with increased global energy demand, our growth in power transmission sales reflected rising sales of high speed gears, primarily for use in the oil and gas and power generation markets. Demand for these products, as well as for after market support, strengthened in both the U.S. and in international markets. Growth in fourth-quarter sales of low speed gears for the domestic industrial market slowed from the pace achieved for the first nine months of 2005, due in part to the impact of the hurricanes on the Gulf Coast and on the overall economy. The backlog for our power transmission business increased 33.3% to $53.4 million at the end of 2005 from the end of 2004. Bookings slowed in the fourth quarter from the third quarter, reflecting growing delivery lead times and project delays during the holidays. Combined with higher fourth-quarter shipments and the third-quarter hurricane delays, these bookings resulted in a backlog reduction from the end of the third quarter of approximately $10 million. Our bookings so far in 2006 have returned to a rate consistent with the levels experienced in 2005.

"Trailer sales increased 1.5% to $18.6 million for the fourth quarter of 2005 from the fourth quarter of 2004, and backlog increased 120.6% to $25.5 million at the end of 2005 from the end of 2004. Both sales and backlog for the fourth quarter declined from the third quarter of 2005, however, primarily because of the combined impact of rising fuel costs, increased expenditures for tractor purchases -- instead of trailer purchases -- to beat new EPA emissions standards beginning in 2007 and continued sluggish demand and increased competition in the van-type trailer market. As in the third quarter, demand remains robust for flat and dump trailers, which produce more attractive margins than van trailers, and we are working to expand production capacity for these products."

Based on Lufkin's financial and operating results for 2005, its total backlog of $146.4 million at year end and its outlook for 2006, the Company today established its guidance for earnings per diluted share for 2006 in a range of $3.50 to $4.00. The Company also established its guidance for earnings per diluted share for the first quarter of 2006 in a range of $0.85 to $1.05, compared with $0.52 for the first quarter of 2005. Lufkin's guidance for 2006 includes the impact of FAS 123R, totaling $0.08 and $0.02 for the full year and for the first quarter, respectively. The pro forma impact on earnings per diluted share for 2005 reflecting the application of FAS 123 totaled $0.08.

Mr. Smith concluded, "Lufkin's significant profitable growth for 2005 strengthened our leadership positions in the oil field pumping equipment and power transmission industries, while demonstrating our continuing ability to expand our operations to meet strong customer demand. With global energy demand expected to remain high during 2006, we are well positioned with the products and services, the management expertise and the financial strength to continue expanding our operations organically or through acquisition in pursuit of further growth in earnings and shareholder value."

Lufkin will discuss its results for the fourth quarter in a teleconference call today at 9:00 a.m. (central time). To listen to the call, participants should dial (719-457-2728) approximately 10 minutes prior to the start of the call. A telephonic replay will be available from 12:00 p.m. (central time) February 9, through 7:00 p.m. (central time) February 16, 2005, by dialing (719) 457-0820 and entering reservation number 3497271.

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       Twelve Months Ended
                                December 31,             December 31,
                             2005        2004         2005         2004

    Sales                 $145,410     $107,358     $492,167     $356,281
    Cost of sales          110,934       89,382      378,827      294,197
    Gross profit            34,476       17,976      113,340       62,084
    Selling, general and
     administrative
     expenses               10,827       11,344       44,135       39,371
    Operating income        23,649        6,632       69,205       22,713
    Interest and other
     income (expense), net      33          206           69           (9)
    Earnings before income
     taxes                  23,682        6,838       69,274       22,704
    Income tax provision     8,318        2,496       24,731        8,287

    Net earnings           $15,364       $4,342      $44,543      $14,417
    Net earnings per share:

    Basic                    $1.05        $0.32        $3.10        $1.06
    Diluted                  $1.03        $0.31        $3.03        $1.04
    Weighted average shares
     outstanding
        Basic               14,670       13,848       14,370       13,570
        Diluted             14,979       14,200       14,686       13,920
    Cash dividends per
     share                   $0.11        $0.09        $0.38        $0.36



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

                                                  December 31,   December 31,
                                                      2005          2004

    Current assets                                  $189,901      $136,336
    Total assets                                     359,795       300,269
    Current liabilities                               56,273        49,105
    Shareholders' equity                             261,078       208,932
    Working capital                                  133,628        87,231



                           LUFKIN INDUSTRIES, INC.
                             Division Performance
                                (In thousands)

                            Three Months Ended       Twelve Months Ended
                               December 31,              December 31,
                             2005        2004         2005         2004
    Sales:
        Oil field          $92,324      $64,813     $307,076     $216,025
        Power transmission  34,441       24,176      106,616       79,498
        Trailer             18,644       18,369       78,476       60,758
          Total           $145,409     $107,358     $492,168     $356,281


                                     December 31,  September 30,  December 31,
                                         2005         2005         2004
    Backlog:

        Oil field                       $67,494      $72,725      $61,642
        Power transmission               53,392       64,633       40,061
        Trailer                          25,465       28,065       11,544
          Total                        $146,351     $165,423     $113,247