Abstract: In the southeastern part of Sikou sag in Jiyang depression．fractural reservoirs are found in muddy and shaly rocks of No．3 member in Shahejie Formation，and high oil production is obtained in some wells．The lithology of productive formation includes oil shale，oil mudstone，limy-mudstone and marlstone．Studies on core and thin-sections showed that there are 4 types of fractuxes：extensional fractures，shearing fractures，diagenetic shrinkage fractures and fractures due to abnormal pressure．The genetic mechanism and identification criteria of these fractures are different．Statistics sh owed that the extensional fraon re is the most important type among them. Regional tectonic stress，lithology, 1ithofacias ，thickness and depth of rocks are main factors influencing the extensional fracture distribution．Based on above analysis, the geological，mechanical and mathematical models were built up. Using 3-D finite element numerica1 simulation method，the authors made a regional stress and extensional fracture distribution prediction and pointed out 8 favored exploration target districts．