2/26/2014 @ 1:53PM

In the summer of 2008, Goldman Sachs loved Brazilian oil and gas company Petrobras so much, they put a $60 price target on it.  And why not? They and other investment banks were forecasting $200 oil prices and Petrobras announcing new oil discoveries regularly. No oil company in the world was finding new reserves like Petrobras.

Ah, the good ole days pre-Lehman Brothers. When oil was hot, and money was as easy to be had as an oxygen molecule.  A year after the crash of Lehman, Petrobras was trading over $50 a share on the NYSE. Today, it is struggling to stay above $11.

Petrobras is a shadow of its former self. Once the darling of global oil firms thanks to its discovery of what many referred to as an underwater Venezuela back in 2007, the deep sea water drillers underestimated the costs involved. Petrobras had to borrow billions, the government became even more involved in the oil business, investors didn’t like it and have snubbed their noses at Petrobras since.

Moreover, the oil fields in the Santos and Campos Basins far off the coasts of Rio de Janeiro and São Paulo states have not been as productive as many oilmen would have liked. In fact, Brazilian billionaire Eike Batista nearly lost his shirt to his failed oil venture OGX this year.

Petrobras of course is lucky. It’s government owned. The company is not going anywhere. But investors have given up hope on what was once the darling of the Brazilian stock market.

No matter what Petrobras does, investors aren’t impressed.

On Wednesday, the company reported a four quarter net profit of R$6.28 billion ($2.6 billion), down 18.9% from the fourth quarter of 2012. This marks the second consecutive quarter decline when compared to the year ago period. When compared to third quarter, PBR’s net is down 39% when consensus was a 35% decline.

The positive news from the earnings announcement is net profits rising 11.3% last year to R$23.6 billion, reversing two years of declines.

Nobody seemed to care. And who is buying in on the lows today? At this rate, Petrobras could fall into the high $10s, a price not seen since May 2005. Back then, the company was an oil and gasoline importer. Two years later everyone thought the story changed. But lackluster refining capacity still has Petrobras importing gasoline.  The government has been slow to allow for price increases on diesel and gas.

Investors are in retreat and to some degree so is Petrobras.

The company said it will invest 9% less in 2014, for a total of R$94.6 billion. Most of it is going to exploration and production of its deep sea wells.  Dollar debt rose to $94.6 billion in 2013 compared to $72.3 billion in 2012, an increase of 31%.

At some point, investors might discover that Petrobras is a steal. There is a lot to like about this company.

Proven oil reserves are 16.57 billion barrels of oil equivalent, thanks to a 43% increase in the proven reserves PBR is pulling out of the pre-salt bedrock in the Atlantic. The country’s reserve-production ratio stands at 20 years.

The government also allowed diesel prices to rise 8% and gasoline prices to rise 4% as of Nov. 30, so that could help Petrobras in the first quarter of 2014.

The company is also producing and selling more oil than it did in 2012. For instance, in the first three quarters of 2013, Petrobras was selling over 2.8 million barrels of oil and gas a day compared to a 2012 average of 2.7 million.

Yet, with a rising debt load, Petrobras is forcing itself to invest less in the one thing that made it a $50 stock: deep sea oil production.