Development of Prey 2 has not been cancelled but the game will not be released in 2012 as planned. The delay is due to the fact that game development has not progressed satisfactorily this past year, and the game does not currently meet our quality standards. Prey 2 has shown great promise and we regret disappointing our fans. We have made a substantial investment in game development to deliver the experience fans want. We are determined only to release the AAA game that fans rightfully expect, and are unwilling to compromise our quality standards to meet a release schedule.
The title, under development at Human Head, was rumored to be cancelled after a story appeared on Dutch website PS Focus. It was first announced in March 2011 with a projected release of 2012.
I think we can all agree that a late, polished and high-quality Prey 2 is far better than no game at all, or worse, a title rushed out the door.