Coal descends by gravity through a vertically arranged, elongated retort through annular passageways where it is distilled by stage-heating by indirect heat exchange between the material and gases ascending through passageways in the center of annular spaces and around them. In the uppermost stage the material is preheated, in the center it is carbonized, and in the lower it gives up heat to ascending gases. Using the process it is possible to gasify 1 ton of natural subbituminous coal, containing about 22% H2O and having a heating value of only 9,300 B. t. u. per lb., to produce 45,000 cu. ft. of net synthesis gas. When distilling carbonaceous materials for recovery of primary tar oils and gases, the solid material, such as coal, is heated to about 600°, but when distilling oil shale for recovery of maximum oil, it is unnecessary to heat the shale higher than 370°-510°.