This is really bizarre. Noticed my 87 stock sammy was missing and narrowed it down to the #2 cylinder. Did compression check. #1, 3 & 4 cylinders were like 130. #2 was 70. added some Mystery Oil and drove it a bit. Checked #2 compression again and it was 50. Squirted some oil in the #2 cylinder and tested again. Heard a little racket as the engine turned over and now there is NO compression.  
Even if the exhaust valve disintegrated there would be some compression, right? Haven't pulled the head yet. any guesses as to what happened?    

Think about it - if the exhaust (or the intake) valve disentegrates - what's going to prevent the air from passing through the port?  How will there be compression?  The valve has to be there and sealing to som eextent to get any compression at all.

X2 with fordem's explination

Will add this as well:

Realistically there is nothing to be gained by removing the head. The motor has worn so much that you need to do a complete rebuild. With a C/R of 130PSI you are lucky that the motor actually starts.

BTW: The FSM suggests a rebuild with a 160PSI.

Just doing a valve job will only cause the rings to blow out because of the excess pressure from the new valve job.

Thanks for the replies guys. Either the valve disintegrated or there's a hole in the piston. I will be doing a full rebuild, down to grinding the crank. When i pull the head I'll know what size the new pistons/rebuild kit needs to be.

I doubt the valve disentegrated.  Valves don't just disentigrate.
Have you tried adjusting the valves?  If the cam isn't closing the valve completely, then that could cause lower than normal compression.
You could also have a burned exhaust valve.  That would cause very low to no compression on a cylinder.  This is going to be my guess on what is wrong.
BTW, the FSM says 170psi is the service limit.  But I have had a few engines in the 150 range and they ran good.  So I didn't spend the time and money to rebuild them.

Thanks for your input Skyhiranger. I'd love to slide by with just a valve adjustment and I know of several sammys that run just fine (IMHO) |removethispart|@ 120-130 psi.

I have checked compression on the same enjine with 3 different compression gauges and gotten 3 readings that varied 30 lbs one way or another so at 150 I would pull my head and have it built if money was tight.  You may get a couple years out of it before it needs a complete overhaul and if not its will only cost you a head gasket if you have to completely overhaul it later as your head will be done.  When you pull the head you will get a good idea of the condition of your cylinders with a visual inspection.  If money is no object right now the a complete overhaul is always the best choice.  Good Luck  c

Finally got the head pulled. I have a bent valve. The head and block are headed for the machine shop and I ordered the rebuild kit.

Valves don't just bend.  Something had to hit the valve.
Did you drop something in the spark plug hole, when you were squirting oil in the cylinder?

most likely floated the valve

Didn't drop anything in with the oil Skyhiranger. Maybe "bent" isn't the correct term. It seemed to be "askew".
azuk13, what exactly is a floated valve? 

Didn't drop anything in with the oil Skyhiranger. Maybe "bent" isn't the correct term. It seemed to be "askew".
azuk13, what exactly is a floated valve? 

So the valve head isn't a perfect circle?  If so, then that is what a burnt valve looks like.
You can "float a valve" when you run the engine at very high RPMs (like 6500 RPM+).  If you didn't run the engine over 6500+RPM, then you didn't float a valve.

when you the engine at high rpms the valve doesnt close because of a worn out valve spring. Skyhiranger is right and it sounds like a burnt valve.