This Lotus Twin Cam Engine was showing low compression on no. 2 cylinder, proper compression on no. 1 and acceptable compression on Nos. 3 and 4.  

It also leaked oil from various spots, including the oil return from the head.

A leakdown test indicated ring wear on all cylinders, valve leakage on no. 3 and possible head gasket leakage between cylinders.

The engine was stripped and inspected.  

What was needed was a new set of exhaust valves, new piston rings and new timing sprockets (as these were extremely worn).

 Some water galleries were blocked, so these were cleaned out. 

All small and big end bearings were checked and in perferct condition as were the pistons.

It is possible that the engine had been rebuilt not too many miles ago but left idle. The rings then probably seized. The vavle buring may have been due to incorrect lapping of the old vavles, the worn timing sprockets, incorrect clerances, overheading or incorrect running in of the engine.

The engine is leak free and still being run in.

Initial indications are a massive increase in torque and power in the lower revs.