hmmm, that could be a few different things causing that.
1;Lack of oil causing the rings to be overworked.
2. Old (worn) and weak rings.
3. Crack or opening in the head - but that doesn't necessarily mean water in the oil or oil in the water.
4. Cracked cylinder
5. Burned, warped or cracked valve(s).
6. Burned or cracked piston.
7. Cylinder worn or out of round.
8. Blown or leaky head gasket.
9. Sticky valve(s).
10. Broken or worn valve spring(s).
11. Bent/worn pushrod(s)
12. Worn camshaft, or a broken lobe on the cam.
13. Worn or bent rocker arm(s).
14. Collapsed lifter(s).
it could mean several things from damaged rings and cylinder walls to tiny cracks in the piston heads or even a sticking or weak overhead valve if they have them
Low compression either from valves or rings. You can do the test wet and dry. Check the lbs. dry and then give a little shot of oil in the plug hole and check the lbs. If the pressure goes up wet, then the rings are losing the pressure. If the pressure is the same wet or dry, then it's a good chance that it needs a valve job.
Answer this may be caused by burnt valves,worn piston rings,blown head gasket.
(copied from google) i ddo a compression test wet and dry if you can.