This morning Lufkin (LUFK) reported outstanding third quarter results and a growing backlog. Additionally, the company’s balance sheet remains pristine, with $110 million in cash and no debt. Despite the positives, the stock tanked, amidst continued deterioration of the equity markets, and extreme bearishness in energy-related equities as the stocks appear to be pricing in sub-$50 oil.

Nevertheless, I remain bullish on LUFK, considering the depressed valuation (well under 10X cash-flow), and solid growth opportunities in both energy and alternative energy sectors. I plan to average down on this stock once the election is over and Paulson is fired. Even assuming that the company’s earnings are halved in the coming recession, the stock is still cheap.

What’s important to note is that on LUFK’s conference call the company made three important points:

Our poll of customers suggests that most 2009 budgets that they’re developing are assuming an economic hurdle rate on a per barrel basis in the range of $60 to $70 and somewhat lower in more mature basins. However we recognize that if events in the broader economy affect either energy demand or access to credit might well alter this picture. Based on information we are getting we believe that the majors and large independents will have a strong cash flow and will be well positioned to maintain their development programs into 2009. We will monitor the pulse of the small and medium independents carefully.

We also expect that a few of the resource plays may come under greater scrutiny at gas prices under $7.00 per mcf. Fortunately we’re strongly leveraged to oil. Last quarter for example about 4/5 of our new bookings in the oilfield division were oil projects and 1/5 natural gas projects. So on a company-wide basis we are less sensitive to changes in gas-related activity than oil.

Eric Mintz – Eagle Asset Management
You mentioned I think you said a significant pick up in power gen. Would that be related to wind energy?

John F. Glick
A lot of what we’re seeing right now is related to gas turbine power gen, but we are working on some things that we may want to talk about in future calls on wind energy both in our operations in Europe and our operations here. We’re making some capital investments to position ourselves a little bit more strongly for those sectors. There is going to be that in the future but my reference was more to the gas turbine sector.