The oil and gas sector has faced turbulent times with the possibility of a global recession. This has translated into some correction for oil and gas stocks. However, even amidst macroeconomic challenges, it’s a good time to look at some quality oil and gas stocks to buy.

The first reason to be optimistic is the stance taken by oil-producing countries. Saudi and other major oil producers recently announced a production cut “totaling up to 1.15 million barrels per day from May until the end of the year.” This move is likely to boost oil prices.

Plus, if the country goes into a recession, central banks will resort to expansionary policies. There is a case for government stimulus to boost economic activity. These scenarios will be positive for oil.

I would therefore look at every decline as an opportunity to accumulate oil and gas stocks. The focus is on companies with a strong balance sheet and healthy cash flow potential.

Let’s talk about three oil and gas stocks to buy.

Chevron Corporation (CVX)

Chevron Corporation (NYSE:CVX) is the top name among oil and gas stocks to buy.

Even after a meaningful correction in crude, CVX stock is sideways over a 12-month period. Given the fundamentals and cash flow potential, the stock is worth accumulating on declines.

It’s also worth mentioning that the stock offers an attractive dividend yield of 3.6%.

Coming to the fundamentals, Chevron has an investment grade balance sheet. Last year, the company reported $47.5 billion in operating cash flows.

With low break-even assets, the company will continue to report strong cash flows. This provides ample flexibility for dividends and aggressive investments.

Chevron has planned to invest $13 to $15 billion annually in the next few years. This will ensure stable production and a healthy reserve replacement ratio.

Chevron is diversifying by investing in low carbon business. Overall, the cash flow machine will be a value creator in the coming years.

Transocean (RIG)

Transocean (NYSE:RIG) stock has trended higher by 47% in the first quarter of 2023.

Even with volatility in oil price, the offshore rig services company stock has been strong. The reason is a healthy order backlog and strong order intake.

To put things into perspective, Transocean reported a backlog of $8.6 billion as of February. The front-end loaded backlog provides clear revenue and cash flow visibility.

An important point to note is that Transocean won orders worth $606 million in the first half of 2022. In the second half, the company’s order intake was $3.3 billion. If this rate of orders continues, RIG stock is set for a major surge.

I must add that new orders are at a higher day rate. This would imply EBITDA margin expansion in 2023 and beyond.

It’s not surprising that Transocean plans to reduce debt by $3 billion in the next few years. Strong cash flows will support deleveraging. As credit metrics improve, the stock will be re-rated.

Occidental Petroleum (OXY)

Warren Buffett has continued to boost stake in Occidental Petroleum (NYSE:OXY) and there are reasons to be bullish. The 1.14% dividend yield stock looks attractive at a forward price-earnings ratio of 11.3.

The most important point to note is that Occidental reported free cash flow of $13.6 billion in 2022. In the same year, the company retired $10.6 billion in debt.

This has helped in reduction of interest and financial expenses by $400 million. Occidental is a robust cash flow story along with meaningful improvement in credit metrics.

The company’s Permian asset production has continued to increase in a quarter-on-quarter basis. The outlook remains positive for 2023.

It’s also worth noting that the company reported proved reserves of 3.8 billion barrels of oil equivalent as of December 2022. The reserve replacement ratio has been healthy and Occidental has clear cash flow visibility even with stable production.

Overall, OXY stock looks attractive with value creation through dividends, share repurchase, and potential stock upside.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.