Kubota with water in oil.

   / Kubota with water in oil. #11  
I would think that is its most likely condensation in the oil as well. Like others have said I would change the oil and watch it real closely. With no real previous service history on the motor it's best just to start clean than to think you have serious mechanical issue.

If it were me I would change out the oil refill with a cheap oil with a motor flush or sea foam until the engine oil got warm and drain. It might cost a little extra due to having to buy an extra filter, flush and oil but than you will know the internals should be pretty void of any previous oil that had water in it. Than fill it back up and keep an eye on it. If you like get another oil sample taken to see if the new oil will have water in it as well.
 
   / Kubota with water in oil. #12  
Check the oil fill location cap and the dipstick cap to make sure they're not loose. Sometimes the smallest gaps cause the biggest problems in the end.
 

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