A coupled simulator based on the MDEM fracturing code and the TOUGH2 reservoir simulator was used to study propagation of hydraulic fractures in a naturally-fractured formation under isotropic and anisotropic in-situ stress conditions. Offset of a propagating hydraulic fracture by a pre-existing natural fracture was observed in some of the simulations. In others, the hydraulic fracture was found to cross a natural fracture without any offset. A mesh-dependence was observed: changing the mesh geometry from regular to irregular affected the fracture pattern, even though the mesh resolution was approximately the same. The mesh dependence particularly affected the fracture pattern observed under isotropic in-situ stress field. The results of the study are of importance for practical application of hydraulic fracture simulation, in particular in gas shale reservoirs.