The Orioles have filled two holes on their roster in the last two days.
Lough, 27, batted .286/.311/.413 in 96 games for the Royals this season and played all three outfield positions. He finished eighth in the American League Rookie of the Year balloting, leading the group in Wins Above Replacement (WAR) according to Baseball-Reference (2.7) and finishing tied with the Rays' Wil Myers (2.4) according to FanGraphs.
Lough is viewed as the replacement for Nate McLouth, who signed with the Nationals as a free agent. He's a left-handed hitter who could share time in left field with Nolan Reimold.
Other left field candidates include Francisco Peguero, Henry Urrutia and Steve Pearce.
Lough went 6-for-16 with three RBIs against the Orioles this summer.
"David Lough had a really good year last year and he's an excellent defensive outfielder," said executive vice president Dan Duquette. "He's a good baserunner, has a good arm and is a solid offensive player. He'll provide us with a replacement for McLouth and also be a backup in center field.
"He's a good hitter, a good baserunner and he has decent power. But he's a terrific defensive outfielder with a good arm. He's a plus-outfielder in left and right, and he can play center, it looks like, about average."
Among all outfielders that played 500 or more innings in 2013, Lough ranked ninth overall with a +14.5 Ultimate Zone Rating, which quantifies how many runs a player saved or allowed through his fielding skills by combining the value of his throwing arm, range and errors. He also ranked sixth among all outfielders in UZR/150, posting a +27.3 (prorated over 150 games).
"He made a significant impact on the Kansas City team when he was brought up," Duquette said. "We're glad to have him on our team. He gives us a left-handed bat that can go in the outfield, and that was our priority, to field a good defensive ballclub."
The Royals selected Lough in the 11th round of the 2007 First-Year Player Draft out of Mercyhurst (Pa.) College. He's a career .297/.349/.459 hitter in seven minor league seasons.
Valencia, 29, batted .304/.335/.553 in 170 plate appearances for the Orioles in 2013. He was considered insurance at third base in case Manny Machado wasn't ready on opening day following knee surgery, as well as the right-handed half of a platoon at designated hitter, but he became expendable after the Orioles selected Michael Almanzar in the Rule 5 draft.
"He had a good year, but it makes sense for us because we picked up Almanzar last week," Duquette said. "Almanzar has a very similar skill set to Valencia, though he's younger. He plays first and third and he's a right-handed hitter who's very good against left-handed pitching."
So, the Orioles found their closer and their left-handed hitting left fielder. They're still in the market for a starting pitcher and perhaps another left-handed bat, and they must decide on a second baseman.
"We're continuing to build our team so we can be a competitor," Duquette said. "Lough gives us a solid left-handed outfielder, a really good defender. He's got a chance to be an everyday ballplayer for us."
The Orioles were still trying to schedule Balfour's physical earlier today. They're hoping to announce his signing by Friday.