Complex sentence: Lookouts were able to spot two guns mounted on the ship's bow and then several minutes later, a large cloud of heavy smoke was observed coming from the ship's stern, indicating that her crew was in the process of scuttling the ship to avoid capture.
Split into simpler sentences: Lookouts were able to spot two guns mounted on the ship's bow. Soon after, a large cloud of heavy smoke was observed coming from the stern of the ship, indicating that her crew was probably in the process of scuttling the ship to avoid capture.