Need help diagnosing where this oil is going in a fully rebuilt 22RE with about 4000 miles. I am losing about 1/2 quart every 200-300 miles. No external leaks. A small amount of black watery liquid shoots out of the tailpipe even when the engines warmed up, but most noticeably at first startup. Some people have suggested this is normal, but I never saw it before the rebuild. If I hold a receipt up to the tailpipe it pops back in every few seconds. Faint smell of burning oil when engine braking. Spark plugs are light tan. Compression reads 130 +/- 5 psi across all cylinders (I live at 7000' so this is equivalent to about 160 psi at sea level). Wet compression with a cap of oil on #1 brought psi from 130 to 140. I did not test the other cylinders wet. Replaced PCV valve and grommet. Any ideas what could be going on here? Anything else I should look at?

 

Although you've only tested one cylinder, it might be helpful to test the other cylinders in the same way. A pressure difference between the cylinders could indicate problems with the piston rings or head gaskets.