Bethesda has officially confirmed that Prey 2 hasn't been cancelled. The game will still be released but it won't hit stores in 2012. The publisher has stated that it wants to release the AAA game fans expect.
"Development of Prey 2 has not been cancelled but the game will not be released in 2012 as planned," reads the statement from Bethesda. "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."