This tale is written for fun and no profit whatsoever. The characters belong to Peter Jackson and JRR Tolkien, although not so you'd recognize that here.
"Do not talk to me of dragon fire! I know its wrath and ruin. I have faced the great serpents of the north!" King Thranduil in The Hobbit: The Desolation of Smaug
Rhovannion, Third Age, somewhere on the northern heath, east of the Misty Mountains . . .
Thranduil awoke with pain lancing through his head and a taste in his mouth like the bottom of a chicken coop. "Ai, Elbereth -- what a hangover! How much did I have to drink last night, anyway? I lost count after the sixth flagon of Dorwinion."
"The Witch king surely knows how to throw a party," said a low voice that sounded like the grating of subterranean rocks. It came from behind him, close enough to feel hot breath against his neck, along with the strong odor of sulfur. Disturbingly close.
Thranduil turned slowly in his bed, which was difficult because his back was resting tightly against something hard and rough, and found himself staring into a huge golden eye. "Sweet Eru in Ea!" he blurted.
"Vile Melkor in the Void!" exclaimed the equally shocked Smaug.
The moment of shocked silence stretched to its breaking point as each considered the implications of last night's bed partner.
"We didn't, ah . . .?" ventured Thranduil in a weak voice.
"If we had, I think you'd notice it," replied the red-gold dragon smugly.
"Why would that be? Listen, Worm, I'm a married man with a position to uphold. I can't have any . . . bastard eggs laid."
"A married what?" exclaimed Smaug. "Did I just hear you say you were a man?"
"Indeed you did, Worm," replied Thranduil
The dragon hissed in horror. "I thought you were a She-elf, what with that long hair and the sparkly dress you were wearing last night, along with that stunning woven wooden tiara."
"And I thought you were a She-dragon, slinking about with those red-painted claws like some kind of scaly seductress! You were simply asking for it!"
"That was dried blood, you fool! Oh, this will never do. Smaug the Magnificent is no shirt-lifter!"
"Neither is Thranduil Oropherion of Eryn Galen!"
"Mirkwood," the dragon corrected.
"Never mind what we call it. I'll never live it down, and I remind you that, for me, living is a very long time."
"You should have thought of that before you drank yourself shit-faced last night."
"You were no pillar of sobriety either," Thranduil responded indignantly. "You had at least four crucibles of molten rock that I counted, and you were weaving like a tree in a high wind."
"You were a lot prettier last night when I had on my lava-glasses," Smaug grumbled. "But I have no wish for this to be bruited about either. I suggest we swear an oath never to speak of this again, regardless of what may have, but sincerely I hope did not happen."
"That is amenable to me as well."
"Very well. I swear by Melkor."
"I swear by Elbereth." Thranduil had been planning to invoke the name of the Allfather, but if the Worm was going to swear by one of the Belain, then so would he.
Suddenly, there came a loud belch, and a blast of heat hit Thranduil on the left cheek.
"Oh, pardon me," said Smaug. "The night of drinking has left me with a sour stomach."
"Pardon you? Pardon you? Look what you have done!" yelled Thranduil, who, after a moment of pained shock, had run to the looking-glass and was now staring at his scorched and blackened visage. "You burned my hair off!"
"It will grow. As you just said, you have a very long time in which to do it," said Smaug blandly. "Perhaps that more manly crew cut will make you less of an enticement to innocent dragons."
"Look what you did to my face. My cheek burns like a thousand balrogs, and it's hideous!"
"Oh come now, don't get yourself into such a fantod. You know it will heal eventually, and until then you can cover it with a glamour so as not to affront the delicate eyes of your subjects."
"Healing this wound will take the better part of an Age! And maintaining a glamour-spell will use up energy that I need to maintain the health and security of my forest."
"Not my problem," replied Smaug. "You assumed the risk when you shared a bed with me. Besides, why don't you get yourself some white gems? The power from the crystallized starlight should give you a spiritual boost. I hear that some of your neighbors, Durin's Folk, have a good supply of white gems for sale. They have a lot of gold too. Hmmm . . ."
"Don't even think about it," Thranduil said, with his eyes (now devoid of their brows and lashes) narrowed.
"Ha ha, Elf, have you no sense of humor? Their hoard is nowhere near large enough to make it worth my while . . . yet."
"Ha-ha, you're such a card," said Thranduil, who planned to warn the dwarves of Erebor not to amass such large amounts of treasure in proximity to an avaricious dragon the very next thing he did. In return, he'd take some of their white gems off their hands.
"And now, Thranduil, I bid you farewell," said Smaug, slithering from the room while Thranduil frantically looked around for a pot of unguent and a hat. How he was going to explain his injuries from what was supposed to have been a solo hunting trip, he had no idea. A campfire accident? Overheating a s'more? He'd figure something out. He always did.
Thus the two went their separate ways. They almost met once more several long-years later, but Thranduil, with the better part of valor, declined the reunion. Neither of them spoke of it again, except once in passing, to an impudent Dwarf, but that is another story.