Oil saturation is an important parameter in evaluation of oil and gas resources. It is difficult to calculate the oil saturation in mud shale formation because the saturation models using today are mainly for sandstone and argillaceous sandstone reservoir. An example from Zhanhua sag has been analyzed. It is pointed out that the major space is fracture and micropore in this kind of reservoir. The conductive mechanism is also analyzed based on the experiment data. On basis of the pore structure exponent m and saturation exponent n, the oil saturation of shale formations was calculated using the Archie formula. The results show that the saturation and coring analysis data achieve a good match in numerical value. Archie formula is a practical equation which is based on the theoretical analysis of physical model and improved by the actual core experimental verification. Therefore, Archie formula can be used to calculate water saturation and meet the demand of calculating accuracy when the log interpretation theory for shale formation is not mature.