Analyst Bruno Montanari put the price target for U.S.-traded shares of Petrobras , as the company is known, under review and was reassessing earnings estimates as a consequence of the scandal. The note was obtained by Reuters on Wednesday.

An internal investigation, which Chief Executive Maria das Graças Foster kicked off as federal prosecutors found evidence of a criminal scheme operating within the company for years, should lead to asset writedowns ranging from 5 billion reais to 21 billion reais, Morgan Stanley said. The dividend cut could impact the company's common shares , Montanari said.

The report underscores the headwinds facing Petrobras, which once was the crown jewel of Brazil's economy, but in recent years has become a symbol of the country's fall from grace. Preferred shares of Petrobras rose for the first day in five on Wednesday.

Petrobras delayed the release of third-quarter earnings last week following accusations that the company systematically overpaid for assets and work by contractors. The excess funds were then funneled to political parties including President Dilma Rousseff's ruling Workers' Party, prosecutors said.

If federal and company probes extend for longer than expected and further evidence of wrongdoing is presented, Petrobras could also face restricted access to funding that could force the company to ramp up debt or look for an equity issuance, the note added.

"We believe that while investigations are ongoing, the company might face difficulties - and higher costs - in its traditional early-year debt issuance," the note said. "In addition, if there is a material delay in the release of annual audited financials, the company would be at risk of outstanding bonds acceleration."

In that case, a solution could be a share offering that "could be very dilutive," Montanari noted.

Investors in Petrobras are increasingly concerned that the world's most-indebted major oil company may technically slip into default on about $12 billion worth of global bonds if it fails to report unaudited earnings by year-end.

($1 = 2.5821 Brazilian reais)

By Guillermo Parra-Bernal