While Petrobras is heavily into the deep-water business, its technical prowess at ferreting out hydrocarbons trapped in the ocean is world class. What is questionable is the firm’s ability to withstand the Brazilian government’s designs to make it an instrument of social policy, as highlighted by its huge coming stock sale and spending program.

Ever since the government floated the monster Petrobras recapitalization, of about $82 billion in total, almost a year ago, the nation’s flagship stock has lagged behind the Bovespa index. This year, the shares have fallen 30 percent, twice as much as industry rivals like Exxon Mobil and Royal Dutch Shell. The labyrinthine complexity of the plan hasn’t helped matters. Even now, Brazilian officials have still to color in the major details of the deal.

What shareholders do know is that the government will endow Petrobras with about five billion extra barrels of oil — a big lift to current proven reserves of about 15 billion barrels. What they don’t know is how many shares the government will expect in return. Estimates of how much Petrobras will pay go as high as $10 a barrel of reserves, a price that would equate to a $50 billion transfer of value from the company to the state.

Whatever the case, a dilution of minority shareholders appears inevitable. If the government values its extra reserves at $5 a barrel, a conservative estimate, it will demand $25 billion in new stock. Since the government owns about a third of Petrobras, private investors would need to ante up some $50 billion of new cash to avoid dilution.

Even if two-thirds of private shareholders participate in the follow-on offering, that could leave the government sopping up the unsubscribed shares, bringing its direct stake to about 40 percent. While it already controls a voting majority, an increase in state ownership would hardly send a positive signal to global capital markets.

That is especially true given heightened concerns about the company’s shareholder value bona fides stemming from its recent capital expenditure plan. Petrobras last week unveiled a plan to step up investment in the low-return refining business, from about $43 billion over five years to $74 billion through 2014. This rightly set off alarm bells given the company’s poor experience in downstream, or refinery, businesses.

The suspicion is that Petrobras is creeping away from its core competency as a deep-water exploration and production pioneer to satisfy government desires to create jobs through the inefficient building and operation of refineries. Based on its projected capital spending, Barclays Capital estimates Petrobras will be paying about twice as much as rivals when measured by its increase in so-called throughput refining capacity.

That is why even after factoring in the huge amounts of new oil that Petrobras will have to exploit and taking into consideration that oil prices have risen, the company’s projections for returns on capital have not budged from around 14 percent a year ago.

True, Petrobras has much to warrant the envy of oil executives worldwide. Not only does it operate a monopoly in one of the world’s fastest-growing major countries, it is on track to nearly double its output over the next decade. Only Iraq could aspire to such growth. And Brazil’s recent political stability — a rare commodity in the troubled world of oil — also gives some succor to investors worried about the state’s intentions.

That may explain why, even with the stock’s recent underperformance, Petrobras trades at about eight times this year’s earnings, according to Thomson Reuters estimates. That is in line with not only Norway’s state-owned Statoil, but also close to Chevron. And that is before factoring in the sale of so much new stock, which would make Petrobras look considerably more expensive than its peers.