LUFKIN, Texas, July 18 --

Lufkin Industries, Inc. (Nasdaq: LUFK) today announced financial results for the second quarter and six months ended June 30, 2007. Sales were $144.5 million for the second quarter compared with $147.7 million for the second quarter of 2006. Net earnings for the second quarter of 2007 were $17.5 million, or $1.15 per diluted share, compared with $17.5 million, or $1.16 per diluted share, for the second quarter of 2006.

For the first six months of 2007, sales were $292.6 million, up from $281.1 million for the comparable period in 2006. Net earnings rose to $35.3 million, or $2.32 per diluted share, for the first half of 2007 from $32.6 million, or $2.16 per diluted share, for the first six months last year.

"Lufkin's earnings for the second quarter, which were in the range of our established guidance for the quarter, reflected the continuation of significant trends evident in the first quarter of the year," commented Douglas V. Smith, president and chief executive officer of Lufkin. "Specifically, these trends included reduced demand for oil field pumping units in North America, largely offset by increased international demand; significant growth in sales and backlog for our power transmission products and services; and soft demand for flatbed and dump trailers, which accentuated the sales impact of our previously discussed decision in the third quarter of 2006 to exit the van trailer business. Due to the mix of these trends, our overall sales, margins and earnings were relatively stable for the second quarter on both a comparable-quarter and sequential-quarter basis.

"Our oil field sales for the second quarter of 2007 were $93.2 million compared with $96.7 million for the second quarter last year and $101.3 million for the first quarter of this year. We have continued to experience growing demand for pumping units in both the Middle East and Latin America, supported by higher energy prices and our multi-year efforts to increase our penetration of these important markets. Demand for pumping units decreased slightly in the U.S. when comparing second-quarter bookings to the first quarter. The U.S. decrease is more pronounced comparing the first half of 2007 to the first half of 2006, due primarily to the energy price volatility seen in the latter part of 2006 and early 2007. Pumping unit demand in Canada is down significantly both on a sequential and comparable-quarter basis. This decrease reflects the more difficult economics of oil and gas production in recent months complicated by very challenging weather circumstances in Canada. Based on increased energy prices and input from our customers, we continue to expect improved North American bookings, particularly in the U.S., for pumping equipment to complement ongoing international growth during the second half of 2007 and in 2008. North American sales for both the Company's oil field automation and oil field services businesses have not slowed in 2007. Our overall oil field division backlog was down 3.9% sequentially to $55.8 million at the end of the second quarter.

"Lufkin's power transmission business produced substantial growth for the second quarter. Sales of $40.4 million increased 30.4% for the quarter from $31.0 million for the second quarter of 2006 and 19.9% from $33.7 million for the first quarter of 2007. The power transmission backlog rose to $112.9 million at the end of the second quarter of 2007, up 45.1% and 9.1% on a comparable-quarter and sequential-quarter basis, respectively. Consistent with the first quarter, our growth was driven by continued strength domestically and internationally in high-speed gears for applications related to energy, such as for oil and gas production, power generation, refining, petrochemical and marine applications. In addition our repair and retrofit services provided through our facilities in the U.S and France expanded.

"As anticipated, second-quarter bookings for the trailer division primarily reflected our decision to exit the lower-margin van trailer business, as well as softer flatbed and dump trailer demand. Trailer sales of $10.9 million for the second quarter of 2007 were 45.3% and 16.5% below the comparable and sequential quarters, respectively, while the trailer backlog was reduced by 70.0% and 25.5%, respectively. We expect trailer demand to remain flat in 2007 based on economic projections and customer input."

Lufkin completed the second quarter with an aggregate backlog of $180.6 million, a 13.3% decrease from the same time in 2006 and a 1.7% increase from the end of the first quarter of 2007. Based on this backlog, the Company's results for the second quarter and first half of 2007 and its outlook regarding industry conditions in each of its businesses, Lufkin, as previously announced, narrowed the range of its established guidance for earnings per diluted share for 2007 to $4.60 to $5.00. Today the Company established its guidance for earnings per diluted share for the third quarter of 2007 in a range of $1.15 to $1.35.

Mr. Smith concluded, "While not discounting the impact of short-term volatility in energy prices, we are optimistic about the strong longer-term outlook for energy demand and the potential that demand represents for Lufkin Industries. We remain well prepared organizationally to respond to the challenges and opportunities inherent in short-term volatility. We will also continue our strategic focus on strengthening our competitive leadership in each of our businesses to leverage the longer-term expansion opportunities before us and, thereby, to achieve further profitable growth and increased shareholder value."

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) 981-5592 approximately 10 minutes prior to the start of the call. A telephonic replay will be available from 12:00 p.m. (central time) July 18, through 7:00 p.m. (central time) July 25, 2007, by dialing (719) 457- 0820 and entering reservation number 3341793.

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,
                                      2007       2006        2007      2006

    Sales                         $144,505   $147,690    $292,585  $281,080
    Cost of sales                  104,181    108,539     212,210   206,489
    Gross profit                    40,324     39,151      80,375    74,591
    Selling, general and
     administrative expenses        14,699     13,099      29,243    25,236
    Operating income                25,625     26,052      51,132    49,355
    Interest and other income
     (expense), net                  1,555        438       2,489       832
    Earnings before income taxes    27,180     26,490      53,621    50,187
    Income tax provision             9,659      9,035      18,331    17,565

    Net earnings                   $17,521    $17,455     $35,290   $32,622

    Net earnings per share:
      Basic                          $1.17      $1.18       $2.35     $2.21
      Diluted                        $1.15      $1.16       $2.32     $2.16
    Weighted average shares
     outstanding
      Basic                         15,027     14,809      14,991    14,791
      Diluted                       15,230     15,091      15,209    15,092
    Cash dividends per share         $0.21      $0.15       $0.42     $0.26



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

                                                     June 30,       Dec. 31,
                                                       2007           2006

    Current assets                                  $275,036       $243,452
    Total assets                                     465,992        429,069
    Current liabilities                               58,934         61,495
    Shareholders' equity                             366,228        328,140
    Working capital                                  216,102        181,957



                           LUFKIN INDUSTRIES, INC.
                             Division Performance
                                (In thousands)

                                   Three Months Ended     Six Months Ended
                                       June 30,               June 30,
                                    2007         2006        2007      2006

    Sales:
      Oil field                  $93,173      $96,741    $194,459  $183,309
      Power transmission          40,402       30,975      74,100    60,549
      Trailer                     10,930       19,974      24,026    37,222
        Total                   $144,505     $147,690    $292,585  $281,080

                                              June 30,   March 31,  June 30,
                                                 2007        2007      2006
    Backlog:
      Oil field                               $55,787     $58,057   $91,028
      Power transmission                      112,903     103,509    77,784
      Trailer                                  11,867      15,932    39,506
        Total                                $180,557    $177,498  $208,318