no compression

I have an 86 xj with a 2.5 L that is only a 3 binger at the moment. I have no compression on #1 cylinder. I am thinking it is valves, but want to get your opinion as well. It has no compression at all, doesnt burn much oil (no smokey exhaust) runs really rich (can smell how rich it is running). I will throw compressed air into #1 cyl this weekend and see where it escapes to, but just wanted an opinion or maybe a suggestion or two of things to look for or at.

You can check the rings by giving #1 a good squirt of motor oil on top of the piston. NOT TOO MUCH, you don't want to risk hydrolocking, just enough to assist the seal on the rings.