According to an anonymous source that reached out to Shacknews, Human Head Studios haven't worked on Prey 2 since November as a result of the developer wanting to work out a better deal with publisher Bethesda. As a result of this a portion of the staff was laid off until a better deal could be reached. However, as the process dragged out, many of the laid off former Human Head employees feared the game would be cancelled altogether. Exactly what the status of Bethesda's relationship with the developer is at the moment is unclear with the latter having teased the possibility of moving on to work on a sequel to Rune.
Bethesda have refused to comment on the situation beyond the statement that Prey 2 would not be released in 2012 due to quality concerns.