According to a Shacknews source who asked not to be identified, Human Head was not happy with the terms of its contract with ZeniMax, and deliberately stopped work on the game in November so it could try to negotiate a more favorable deal. While doing that, many on the development team were laid off, with the hope they would be rehired if the contract issue was resolved favorably. The process seemed to be gathering some positive momentum until January when ZeniMax's responses all but stopped, causing some of the laid-off Prey 2 team to wonder if the game would ever see the light of day.
By March 1, the source said, things had progressed a bit, leaving the Prey 2 team hopeful that they would return to work soon. But that quickly soured the following day. The source could provide no further first-hand details after March 2.
When contacted for a response, an official at ZeniMax responded that "we aren't commenting on the game's development beyond what was said in the statement that was released this morning."
In light of the new information, the official stance that "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" seems to throw Human Head under the creative bus. With development stalled for months, it's no surprise that the game would be unable to meet so-called "quality standards."
It is unclear at this point what ZeniMax will do with the title now. A new developer certainly looks likely, and it would not be the first time Bethesda had changed developers on a game, namely shifting Rogue Warrior from Zombie Studios to Rebellion in 2009.
The source did say that one thing that kept the Human Head studio in a positive frame of mind was that they were working on a new high-profile project and negotiations for that game were going quite well. While they didn't give us any further details, the developer did recently admit they were "considering" a sequel to Rune.