During the circa-1980 boom, the oil and gas industry and its followers believed the sky was the limit for commodity prices, and that the capital to fund their exuberant expectations was virtually limitless. Who would have dreamed that $35 to $40 oil prices would topple to $9 to $10 by the summer of 1986-and return to that level in January 1999? Who would have dreamed that the shakeout of the 1980s and '90s would have so brutally decimated the ranks of the E&P and oilfield-service sectors? Any child or adult who has ever played Monopoly would. The game teaches that if one is overly aggressive in acquiring properties and/or developing them, soon the player will experience insufficient capital to withstand the unexpected pitfalls the game offers as it wears on. The oil and gas game is also rife with chance, and for many operators and investors who played the game in the frothy days of 1981, it was indeed like rolling dice. But as the industry went through all the cycles that followed, it eventually learned to be smarter in its acquisitions and drilling, reducing both risks and costs so that it could not only survive but also be profitable during the tough times. Last year, for instance, producers didn't jump when commodity prices returned to near-1981 levels. Instead, they cautiously kept their powder dry, paid down debt and shored up their balance sheets-before moving ahead to the next space: 2001. At the same time, investors also embraced a cautious attitude-not trusting commodity prices to remain at heady levels. To chronicle this 20-year path to wisdom, Oil and Gas Investor, which was born in the boom of 1981, has used a Monopoly-like game board illustration. It shows the various highlights-and lowlights-of each year, from 1981 to today. 1981 • President Reagan decontrols oil prices. • U.S. rig count hits 4,530. • Industry eyes $100 oil, $9 gas. • Denver OTC market booms. • Apache forms first master limited partnership. • Public oil and gas fund sales hit a record $2.9 billion . • Dupont buys Conoco for $8 billion. 1982 • Penn Square Bank fails; ditto for Abilene National Bank. • Public partnership sales slide to $2.3 billion. • Six Denver OTC firms halted. • Marathon shareholders approve $6.6-billion merger with U.S. Steel. • Domestic oil reserves fall to 30-year low. Rig count drops 22%; pipe prices and seismic crew counts also drop. • Bill proposed to allow pension funds to invest in oil and gas partnerships. 1983 • Amex introduces first oil and gas stock index options. • First areawide OCS lease sale in the Gulf of Mexico; 656 tracts receive bids. • Crude oil futures begin trading on Nymex. • Supreme Court upholds Windfall Profit Tax. • Oil-patch fraud rises as con artists swarm into sector. • First National Bank of Midland collapses. • Davis Oil makes splash in Amos Draw Field in Powder River Basin. • Domestic rig count falls to 1,807 in mid-April. 1984 • Year of the merger: Royal Dutch buys remainder of Shell Oil it didn't already own for $5.2 billion; Chevron makes $13.3-billion bid for Gulf Oil after run at Gulf by T. Boone Pickens (he will later take runs at Unocal and Phillips); Mobil buys Superior Oil for $5.7 billion. • W.R. Grace, R.J. Reynolds and Georgia-Pacific dump oil and gas subsidiaries. • Some 160,000 limited partnership investors file suit against fund-raiser Petro-Lewis. • U.S. gas reserves fall to lowest level since 1976, but the gas "bubble" persists. • A smarter industry brings drilling costs down to 1979 levels. • Reg D private oil and gas funds raise $1.6 billion-as much as public funds. 1985 • Master limited partnership offerings grow by 50%; account for $1.5 billion, or 60% of all oil and gas partnership sales. • Prices for "new" natural gas are decontrolled. • Industry rails against Treasury's flat-tax proposal. • A controversial T. Boone Pickens makes the cover of Time. • Denver oilman predicts crude will hit $90 per barrel by 1995. • Fears abound that oil could drop to $23 by spring of 1986. • Industry analyst Daniel Yergin predicts restructuring will shape future of petroleum industry. • Rig count for first half of year averages 2,328. • International Petroleum Exchange launches Brent crude futures contract. 1986 • OPEC floods market with oil; crude prices crash to $9 per barrel by July. • Tax Reform Act of 1986 ends partnership tax shelters. • Moody's reports record number of corporate downgrades. • Units of Enerplus Resources Corp.-Canada's first oil and gas royalty trust-begin trading on Toronto Stock Exchange. • Crude oil options approved for trading on Nymex. • China beckons foreign oil companies with onshore opportunities. 1987 • Texaco seeks bankruptcy protection after fight with Pennzoil (which was awarded a $10.3-billion judgment) over Getty Oil merger. • Take-or-pay liabilities by gas pipelines mount to more than $6 billion. • Oil imports hit seven-year high; domestic crude production drops to 8.2 million barrels per day. • FERC Order 500 creates open access for gas pipelines. • Congress ends federal onshore lease lottery system. • Dow drops 508 points in October; oil analysts see buying opportunity. • U.S. rig count ends year above 1,000; oil prices, around $20. 1988 • Dwindling gas deliverability and expiring leases prompt stepped-up Gulf of Mexico drilling. • A restructured Texaco emerges from Chapter 11 and enters a downstream joint venture with the Saudis. • Tenneco announces it will break up; Sun Co. spins off E&P operations to shareholders as Oryx. • Horizontal drilling increases in the oil patch. • OPEC squabbles keep oil prices below $18. • Argentina opens up to foreign oil companies, to reverse production declines. • Officials from five states sweep Los Angeles "boiler rooms." 1989 • Exxon's Valdez tanker spills oil in Alaska's Prince William Sound. • For the first time since 1997, the U.S. imports more than half its petroleum needs. • Austin Chalk play in Texas heats up, prompted by horizontal drilling technology. • Oil stocks' performance best Dow and S&P in first half of year. • Natural Gas Decontrol Act decontrols wellhead prices. • The Berlin Wall comes down; exploration opportunities open up. • Section 29 tax credits boost coalbed methane drilling. 1990 • Nymex begins natural gas futures trading. • Iraq invades Kuwait; oil prices soar. • For the first time, footage drilled for gas in U.S. exceeds footage drilled for oil. • 3-D seismic technology begins to take off. • The USSR breaks up and a flurry of E&P deals with foreign oil companies begins. • Service and supply companies emerge from long winter of financial discontent. 1991 • Persian Gulf engulfed in war as Operation Desert Storm pushes Iraq's Saddam Hussein out of Kuwait; clean up of 600 damaged oil wells begins. • Consensus estimates are that post-Gulf War oil prices will settle in the mid-$20s. • American Petroleum Institute says environmental costs will hike industry overhead $15- to $23 billion by end of decade. • BP and Triton Energy announce the 1.5-billion-barrel Cusiana oil find in Colombia. • Enron closes its first volumetric production payment financing deal. • Drilling, income-fund sales crater in first half; some sponsors roll up partnerships into corporate form. 1992 • Enron announces its intention to become the first natural gas major; today, it's the largest buyer and seller of gas and electricity in North America. • 1991-92 winter gas prices plunge 40% on the spot market. • The U.S. rig count hits a record low of 596 in June and averages just 721 for the year. • Congress passes bill giving some relief from the Alternative Minimum Tax. • California producers lobby for export of their heavy crude to Asian markets. • Russian oil and gas deals stumble amid tough terms and conflicting authorities. 1993 • Initial-public-offering fever hits Wall Street, as 20 new oil and gas companies get listed. Same fever rampant in Canada, as new junior oils parade to market. • Argentina's YPF debuts on the NYSE; further state-owned oils in Latin America expected to privatize. • Oil service stocks up 74% in market value versus the prior year. • Gas prices rebound to new highs. • First-ever North Sea turnkey well drilled by Global Marine. • Phillips and Anadarko announce Mahogany subsalt find in Gulf of Mexico. 1994 • Houston: energy hub becomes financial hub as Wall Street moves to Texas. • Canadian oil industry capital spending rises 66%; number of gas wells drilled triples. • Thailand's upstream industry responds to 13% annual petroleum demand growth. • Strategic alliances between service companies and operators proliferate. • Ecuador courts bigger chunk of foreign upstream spending; aims to double oil production by 1997. • Wells drilled, rig count in U.S. seen rising, driven by gas demand and use of 3-D seismic. • Kern County, California, operators struggle with single-digit prices for heavy oil. 1995 • Derivatives scare, scandals arise, but operators encouraged to use risk management products. • Shell, Amoco announce joint venture to operate their Permian Basin properties. • Gas marketing consolidation begins as major producers and marketers join forces. • Chase Manhattan, Chemical Bank combine in $10-billion merger; new Chase becomes leading arranger of energy loans worldwide. • Kansas City Board of Trade launches gas futures trading. • North Sea oil-service market continues to gain strength as U.S. market weakens. 1996 • Offshore West Africa heats up as U.S. independents move into what was once a majors-only province. • Profits of E&P companies triple; record reserve replacement rates posted. Stocks soar. • World's largest gas company, Russia's Gazprom, goes public. • Venezuela holds first oil and gas exploration leasing round. • Canada bristles with M&A, heavy oil and royalty trust fever. • Offshore dayrates hit 14-year high. • Hibernia Project opens up eastern Canada's offshore province. 1997 • Latin America becomes active growth spot as Venezuela coaxes foreign investment and Brazil opens its deepwater region. • Louisiana part of Austin Chalk play heats up. • U.S. land drilling industry begins recovery; offshore dayrates rise 42% as activity in Gulf of Mexico hits all-time high. • Burlington Resources buys LL&E for $3 billion, creating the first super-independent. • E&P spending highest since 1981; independents outspend Big Oil. • Jonah Field biggest play in Rockies. • The multinational Kyoto Accord portends more global natural gas use. 1998 • Oil prices start a free-fall and E&P stocks plummet. • BP, Amoco combine in $48-billion merger; Kerr-McGee buys Oryx in $4-billion deal. • China's Bohai Bay draws Western oil companies. • Halliburton buys Dresser for $8.5 billion. Baker Hughes acquires Western Atlas for $6.5 billion. • Canada's deep Foothills gas play booms. • Bank America combines with NationsBank in $60-billion deal; Banc One merges with First Chicago NBD in $30-billion deal. • Coalbed methane plays in U.S. flourish. • Occidental pays $3.6 billion for Elk Hills Naval Petroleum Reserve. 1999 • Convergence between electric utilities and natural gas pipelines creates new energy conglomerates. • Lower 48 oil output at 50-year low as crude prices fall to $10 per barrel. U.S. rig count reaches new low of 488. • OPEC moves to further cut output. Oil price recovery begins; year-end prices climb to $24. • Northwest Territories hot spot in Canada. • Exploration for gas in California's deep San Joaquin under way. • U.K. North Sea oil production breaks record, reaching 2.62 million barrels per day. • Canadian export pipeline expansion continues. 2000 • Exxon Mobil begins first full year of operations after year-end $81-billion merger. • Oil prices rise to $37; gas prices, to $5-plus. Oil stocks, however, don't respond. Investors cautious about sustainability of high commodity prices. • Industry focuses on stock buybacks, paying down debt. • BP Amoco acquires Arco for $28 billion; Burlington buys Poco Petroleums for $3.7 billion; Chevron and Texaco agree to merge. • Drilling heats up in Northwest Territories and offshore eastern Canada. • PetroChina's ADRs debut on NYSE, raising $3.1 billion. • Poland courts Western oil companies. • Midcaps' earnings up 358% due to higher commodity prices. • IPOs begin to come to market in fall. • Kansas City Board of Trade discontinues gas futures trading. 2001 • Wall Street capital markets to be open for producers and service companies. • Operators expected to use high commodity prices to more aggressively drill up and acquire reserves. • Consolidation to continue within E&P, oil-service and refining sectors. • Oil prices expected to average $28.80; gas, $4.60. • Early stages of U.S. energy-supply crisis seen by Simmons & Co.; massive expansion and rebuild of industry imperative amid steep production decline curves.