In recent years, a new type of natural gas hydrate reservoir (designated as Class 1S reservoir) has been discovered in the Qiongdongnan Basin. Within this hydrate reservoir, free gas and hydrate coexist within the same stratum. The Class 1S reservoir is comprised of three distinct zones: the gas accumulation zone, the three-phase zone, and the hydrate-bearing zone. It exhibits significant commercial development potential. This paper analyzes the formation mechanism and geological context of Class 1S hydrates. A geological model was established and numerical simulation methods were employed to evaluate its production capacity, elucidating the evolutionary patterns of hydrate saturation distribution at different well locations. The simulation results indicate that production wells should be prioritised in gas accumulation zones in order to achieve the highest cumulative gas production. Additional production wells may be considered in later stages to enhance recovery rates. Secondary hydrate formation significantly impacts production in Hydrate-bearing zone and three-phase zone. Measures such as wellbore heating can be employed to minimize secondary hydrate formation around the wellbore.