Development on Prey 2 broke down when Human Head refused a buy-out offer from publisher Bethesda, reports IGN.

According to multiple anonymous sources cited by the website, independent studio Human Head had contract with Bethesda that prevented it from leading development on any other projects while Prey 2 was in the works.

The sources claim that after a promising showing at E3 2011, Bethesda informally agreed to extend the development deadline by an additional six months to a year in order to bring the game up to a satisfactory standard for release.

However, the sources go on to allege that Bethesda reneged on that informal agreement, and when Human Head ran out of funds to continue development on Prey 2, the publisher came forward with a buy-out proposal.

Bethesda “thought they could bully [Human Head] into a corner,” said one source that worked for the developer. “They wanted to buy us at a sweet price.”

The studio rejected the offer, claims IGN, as it didn’t want to work with a publisher that was “bleeding Human Head dry.”

IGN’s sources also claim that Human Head came forward with several counter-offers, but that these were ignored by Bethesda. Human Head then allegedly ceased development on Prey 2, and picked up supporting work on BioShock Infinite and Defiance until the contract with Bethesda expired.

Prey 2 is now rumoured to be in development at Dishonored developer Arkane, although IGN’s sources claim to have no knowledge of this.

Bethesda declined to comment on IGN’s original story, only reiterating what it has said earlier last year:

“We delayed the release of Prey 2 as development did not progress satisfactorily, and the game did not meet our quality standards ... Beyond this, we don’t have any new update or comment.”