(Adds comment from former executive, updates share performance)
By Jeb Blount
RIO DE JANEIRO, Nov 17 (Reuters) - Brazil's state-run oil company Petroleo Brasileiro SA vowed on Monday to fully investigate a graft scandal that has knocked its shares lower and saddled President Dilma Rousseff's government with its biggest political crisis.
In their first public comments since a former Petrobras executive was arrested in connection with the scandal last Friday, Chief Executive Officer Maria das Gracas Foster and other company leaders said they had hired legal consultants to investigate the allegations.
Petrobras delayed the release of its 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 Rousseff's ruling Workers' Party, prosecutors said.
While neither confirming nor denying that such conduct took place, executives said Monday that Petrobras will reassess the value of some assets based on whether bribes were part of the purchase price, and could take accounting losses accordingly.
As a result, fully audited quarterly results might not be available until the end of January, they said.
That raises the prospect of a long period of uncertainty for a company that was once the crown jewel of Brazil's economy, but has in recent years become a symbol of the country's fall from grace.
Petrobras' preferred shares, its most-traded class of stock, fell 3 percent on Friday and shed another 4.5 percent in Sao Paulo on Monday. The shares have lost more than 20 percent this year.
"We are working with all our strength to have the (audited) earnings report ready and to cooperate with the investigation in the hope that it is resolved quickly," Chief Financial Officer Almir Barbassa said during a conference call with analysts.
Rousseff was chairwoman of the Petrobras board of directors for seven years through 2010, when much of the alleged corruption took place. While she has denied any role in the wrongdoing and is not facing charges, the scandal could further weaken her government at a time when it faces a stagnant economy and falling investor confidence.
Investors have been concerned that the world's most-indebted major oil company risks a technical default on about $12 billion dollars in bonds if it doesn't report unaudited earnings by year end
Petrobras will be unable to sell new debt until it releases the earnings, company officials said.
Petrobras' total debt stood at around $140 billion at the end of June, and its stock of outstanding bonds are equivalent to $54 billion.
On Friday, Brazilian federal police arrested Renato Duque, the company's former director of corporate services, and several leaders of powerful Brazilian construction and engineering companies in connection with the scandal. The company's former refining chief, Paulo Roberto Costa, whose allegations led to the dragnet, has also been under arrest since March.
During police questioning on Monday, Duque denied taking part in any criminal activity and said he knew nothing about an alleged cartel of Petrobras service providers, according to a statement released by his advisers.
Rousseff, who won reelection on Oct. 26, has pledged a thorough investigation and said on Sunday the case could help change Brazil's culture of corruption.
On Monday, executives addressed the allegations as soon as the call began, without being prompted by participants. The company also said it would create a separate compliance department with a senior executive in charge.
"We need to have the same respect for our internal governance as we need to have for our technical operations," Foster said.
Analysts and traders warned that potential corruption-related write-downs could lead to Petrobras being stripped of its investment-grade credit rating.
On Monday, Petrobras said it would miss its oil production target for 2014, with output growing between 5.5 percent and 6 percent, short of its goal of 6.5 percent to 8.5 percent.
Petrobras also said an investigation turned up no sign of wrongdoing by SBM Offshore NV. Petrobras added that it still did not have enough information from SBM, the world's largest leaser of offshore oil-production ships, and Dutch authorities to allow SBM to bid for Petrobras contracts again.
SBM settled a bribery case involving payments in Brazil, Angola and Equatorial Guinea with Dutch prosecutors for $240 million on Nov 12. (Additional reporting by Guillermo Parra-Bernal and Roberto Samora; Writing by Brian Winter and Jeb Blount; Editing by Bernadette Baum, W Simon and Alan Crosby)