Do a leak down test and verify where it is leaking at rings, valves, hg.....

If it is the pistons and the motor has sat for a while try this. Rotate crank so pistons are about halfway up the bore. Remove sparkplugs for cyl 1 and 3 and fill up cylinders with ATF fluid and let soak for a day. This can sometimes free up stuck rings and I've had to do this before with some junkyard or imported engines that have sat for a long time. To get the atf out use a hand fluid pump and pump out as much as you can, some fluid may have bleed past the rings and is now in your oil pan. Pull the other two plugs out and cover the ATF'd cylinders with a rag and crank the engine over with the starter to fling out the remaining fluid, can be a bit messy. Drain the oil (leave the filter)and put cheap oil back in. Put the plugs back in and start it up. Let it run a bit and see if compression comes back up. If it does drain oil and change filter, put whatever normal oil you run in and your good to go.

I've used this before on engines that I thought needed to be rebuilt and it brought compression back up to normal and the motors ran fine.