The troubled development of Prey 2 has resulted in a war of words between publisher Bethesda and former developer Human Head. Officially, the FPS is not canceled, but "in limbo." Bethesda claimed that Human Head's work was "not good enough." The developer disagrees, obviously.
Rumor has it that Dishonored developer Arkane has taken over the project. That theory has been given legitimacy, with leaked emails showing Arkane creative director Raphael Colantonio discussing the project.
"Austin has been officially green lit for its own project," the message acquired by Kotaku reads. "We decided that Prey 2 presented an interesting opportunity if we could reboot it. Zenimax accepted our pitch which was 'the spiritual successor to System Shock.'" The message was dated May 27, around the time the rumors about Arkane's involvement started circulating.
While the evidence seems concrete, Arkane's official comment is that the studio is not working on Prey 2. Colantonio told RPS that "we've been looking at where that rumor came from, and I really don’t know."