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Image courtesy of Petrobras

The stock price for Petroleo Brasileiro SA (Petrobras), Brazil’s state-controlled oil company, fell to eight-year low this week, with a single-day decline of 5.8% on Monday.

Petrobras was once among the world’s most valuable companies.

“Over one-quarter of the company’s value has vanished over the past year as Petrobras has struggled to lift production from its ultra-deepwater fields,” oilprice.com said.

Petrobras is saddled with $112 billion in debt, according to Bloomberg, and has a capital expenditures budget higher than projected revenues, indicating that debt may climb further.

The cost to protect Petrobras’s debt against non-payment rose sharply since the start of the year, indicating a growing perception in financial markets of risk that  the company may not meet its payment obligations.

Oil and gas services company Halliburton said in January it expects Petrobras to reduce its drilling fleet in 2014 to cut expenses, adding to the perception of heightened credit risk in Brazil’s flagship energy company.

Petrobras had set a goal to double production by 2020. The drilling cutback threatens that plan, Halliburton said.

The company’s refining and supply unit has lost $35 billion since 2011 when it began subsidizing imports under the government’s anti-inflation program.

The sharp sell off of Petrobras stock this month was partly due to the broader discounting of emerging markets.

But Petrobras’ troubles run deeper.

Pre-salt deposits off the coast of Rio de Janeiro have been a disappointment, oilprice.com said.

“The discoveries a few years ago catapulted Petrobras to new heights, and sparked talks of Brazil’s rise as a world power. Yet the company has been plagued with rising debt and government interference. For example, the state-run company sells fuel at artificially low prices and must use local content in its drilling operations – lowering revenue and increasing costs,” the report said.

Petrobras’ free cash flow ranked last out of 113 oil and gas companies surveyed by Bloomberg.

The company produced a record 371,000 barrels per day in December 2013.

It added six new platforms in recent months.