Long-awaited audit may shed light on Petrobras scandal

Petrobras bribery scandal: How much was ripped off?
Petrobras bribery scandal: How much was ripped off?

Petrobras, the Brazilian oil giant, is hoping to finally release audited financial results for the fourth quarter after U.S. markets close on Wednesday, including an estimate of how much has been stripped out of the company by years of alleged fraud.

The state-controlled oil company is engulfed in what's probably the largest financial scandal in Brazil's history—a high bar, given the country's record of corruption. And Wednesday's earnings report has big implications for investors and maybe even the future course of the world's seventh-biggest economy.

Markets are closely examining the results for the level of write-offs and impairments on Petrobras assets, whose values may have been inflated by the fraud. Estimates on how big those numbers may be are staggering: anywhere from $6 billion to $30 billion.

Read MoreCheap oil is just one of many worries for Brazil's Petrobras

Andre Gordon of AMEC, a Brazilian shareholders' rights group, said he's "waiting to see the balance sheet" and expects impairments and writeoffs of between $10 billion to $15 billion. AMEC is active in lobbying for better corporate governance at Petrobras and within Brazil in general.

Gordon said he hopes for a turning point for the company that will lead to less government entanglement with Petrobras, "but I am skeptical."

"Not even the opposition party talks about privatization of Petrobras—only small insignificant parties with small market share," he said.

Petrobras headquarters in Rio De Janeiro, Brazil.
Justin Solomon | CNBC

The scandal started with the arrest early last year of a company director, who subsequently struck a deal with prosecutors in September. Since then, details have emerged almost daily of a decade-long, alleged bribery scheme involving company officials.

The executive alleged to investigators that for nearly 10 years, Petrobras contracts were routinely padded by 3 percent, with the extra money used for bribes and kickbacks. Much of that money was supposedly funneled to the country's ruling political parties.

Read MoreWhy the Petrobras scandal is shaking all of Brazil

Other executives have since come forward, and nearly 50 people have been arrested or charged, ranging from more than a dozen CEOs to politicians to party officials, including the treasurer of Brazilian President Dilma Rousseff's Workers Party.

Rousseff was board chairwoman of Petrobras for much of the time in question—she stepped down from the company in 2010 in order to run for president—but investigators have apparently thus far found no evidence linking her to the scheme. She denies any knowledge of it.

Still, the population of Brazil, now the No. 2 economy in the Western Hemisphere, is holding its collective breath—some with fear, others with hope—to see if the president will be implicated in some way.

A Petrobras gas station in Rio De Janeiro, Brazil.
Justin Solomon | CNBC

Petrobras investors, debt holders and even energy markets have their own sets of worries about the audit.

If the earnings report is deemed credible by markets, the next step will be to convince markets that the company has a plan to establish a positive cash flow. Petrobras started a borrowing binge years before the price of oil began plunging in 2014, and it quickly became the most indebted company in the world.

That money was to be used to expand exploration in drilling in the ultra-deep waters 300 kilometers (185 miles) off the coast of Brazil. The company has missed production targets, however, and Petrobras isn't producing enough cash to fund its capital expenditures and dividend.

Read More'No solution' to Brazil's crisis: Economist

Petrobras sold $51 billion worth of bonds in the five years leading up to April 2014, according to data compiled by Thomson Reuters.

Now that it's locked out of global capital markets due to the scandal, analysts expect big cuts to expenditures and perhaps the dividend, too.

In terms of sheer energy output potential, Petrobras commands oil and gas reserves of about 13 billion barrels.

With so much at stake, Gordon said, he believes Wednesday's report will be credible and free from political intervention. "The auditors know," he said, "that all the world is watching them."