To answer the question, yes. If oil in the cylinder brings up compression, then you have a ring sealing issue. Now WHY they're not sealing is another matter! You didn't say whether or not this engine had been running for the last several years. If it has NOT been running for 5 years or better, then the chances are that the rings are just stuck in the lands. There are several products that you can use to leave it set and soak. My personal choice is Marvel Mystery Oil. I'd also give it the full Monte. SLOWLY pour it down the carb while running, (or you can hydro lock it and bend rods and stuff. It ain't pretty...) Usually hold the engine at about 2000 rpm while pouring until it stalls the engine. (Don't MAINTAIN 2000. Just start there) Once it stalls, pull your plugs and give it a good healthy amount in each cylinder. I know it's hard to leave it set, but leave it alone for a week. After a week, crank it over with the plugs still out. Install your plugs and start! Don't start revving the snot out of it! Just keep it running until it will idle on its own. Once it comes up to operating temperature, take it out on the road. Don't hammer it in first gear. Wait until second. Hammer it, but don't wind it tight. In third, hammer it and wind it tight. Make sure you watch the mirror when you do! Slow down while still in third and hammer it again. When it stops blowing smoke when you wind it up in third, you're down. Most likely. you'll have to drop the idle when you're done.
If it HAS been running, you can try this anyway. You have nothing to lose but the cost of the MMO and some time!
