RangerGoolz,
The 86 2.9l has only one O² sensor; it was originally located on last ½' of the passenger side of the "H" pipe collector.
ADVICE/NOTE:
This stock engine will run GREAT with a single 2¼" exhaust, duals will be too much...if you perform a max torque rebuild on a 2.9l, it will run great on a single 2½" exhaust.
If you are dead set intent on a "true dual exhaust" then you are in luck as the 1986 features an "H" pipe after the exhaust manifolds which is perfect for duals, verses the later added "Y" pipe; however, the tubing is only 1½" so that is the largest I would use if I were to dual a stock 2.9l (which I would not).
Additionally, I recommend keeping the cat(s), I've rebuild the exhaust on both a 1987 Ranger and 1987 Bronco 2, several times, always keeping the cats and suffered no negative issues. In fact both those rigs get over 25 mpg in town, so I do not see any advantages to removing them.
If your exhaust needs replacement, there are free flowing cats available from many sources for under $100, so even the cost for a cat that may live for 20 years depending on your driving needs is relatively inexpensive. I use a 2 into 1 cat, with a single 2½ exhaust for my max torque rebuilt 2.9l, I can't imagine better results.
As a closing note, if you are replacing your muffler(s) I must recommend checking out the universal mufflers that BORLA has to offer. Their simple Turbo muffler performs great and has a nice, subtle sound. If you want more sound they offer several other models; their XR1 is so good it flows better than strait pipe!!!