Oil in exhaust pipe, dripping from the mesh section just pass the header pipe where it connects to the tail pipe. Did a Compression Test. All Cyl. read 120 and no oil on plugs. Where could the oil be coming from.

You put compressed air into the cylinder an listen for the air escaping , if coming out of the throttle plate ,burnt intake valve . If you hear air coming out of exhaust pipe , burnt exhaust valve . If you hear air coming out dip stick tube bad rings or piston damage. How To Perform Leak Down Test EricTheCarGuy

Cold weather right? Dripping is the water condensing from the exhaust gases. The "smoke" is more than likely water vapor, just like your breath in cold weather. If you have smoke (black) in warmer weather, you have an excess fuel problem and won't pass emmision tests. If blue smoke you have oil leaks into the coubustion chamber. Also will not pass emmisions test.

great question, a nice symptoms posted.!!!! and car !
The water, (coolant) can only go 3 places.
1: on the ground, (or at passenger toes, look there)
2: into the inside of the engine (see engine oil turn to milk chocolate shake?
3: in the the A/T tranny pan, same thing same milk.
4: out the exhaust, pipe end point, see steam there ALL THE TIME?

this is short term loss.
long term is normal this is evaporation.
here are the tests.

1: no steam ,tail
2: no carbon or oil in rad neck (cold)
3: milk in pans. per above.
4: rad neck tester (green/blue) chem test unit finds exh. gasses in the rad.
5: same place, RAD leak down tester.
6: compression test. all cyl.
7: cylinder leak down tester can even show me here it leaks (ASK, this is advanced testing methods but easy to do)

You might want to do a tail pipe pressure test to be sure your exhaust system is not partly plugged. I am assuming that you pulled the 02 sensor from the exhaust pipes or headers. The headers sound as if they have been on the truck for awhile and are not new to the unit so then I would not think they are causing the problem. But I tell you for sure the plugged exhaust system will.

Could be oil dripping from the valve cover onto the exhaust pipe.
One drip can cause alot of smoke when it hits the pipe.
Could be power steering fluid too.

rings or a bad valve seal

is the oil low? If its not leaking, its going out the tail pipe.

check where the headers come off of the engine exhaust leaks are generally quite loud and you will either be at the headers/exhaust manifold or just as you come off that bend there will be a flange gasket inside the two pipes joining. from the bend to the straight pipe just as it passes the gearbox and starts to straighten out.

possible valves---- listen to the intake inlet and exhaust pipe for"POPPING", that will indicate a valve bad, if you have a compressor you can air charge that cylinder and listen for air by-passing....other problem may be the piston is damaged, usually by a leaking injector or ign problem (detonation)...this is major.....hopefully not....hope this helps...GL

is it on the exhaust pipe or the header