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Oil and gas firm Faroe Petroleum has bowed to pressure from shareholders and shelved a proposed new management bonus scheme.

The exceptional performance incentive plan would have granted free share options to senior executives based on the company's performance.

But the proposal was withdrawn at Faroe's annual general meeting, following talks with shareholders.

The firm said it intended to make a number of changes to the plan.

Under the scheme, directors would have received nil-cost share options if the board met annual return targets over the next three years.

But shareholder support group ShareSoc urged Faroe stakeholders to vote against the scheme, claiming it would encourage a focus on the short-term share price instead of the fundamental strength of the business.

In a statement, Faroe chairman John Bentley said: "Since the publication of the notice of annual general meeting in April 2012, the company has been in further dialogue with its larger shareholders.

"Following those discussions, the company intends to make a number of changes to the proposed Faroe Petroleum Exceptional Performance Incentive Plan ('EPIP') and consequently Resolution 7 has been withdrawn.

"A further announcement will be made in due course as to the conclusion of these discussions and the amendments to the Faroe Petroleum EPIP."

Norway prospect

Meanwhile, drilling has started at Faroe's first operated well off Norway.

Aberdeen-based Faroe said it was targeting its Clapton prospect in the Norwegian North Sea.

The well is about three miles east of the Eldfisk East Field and six miles north of the Valhall Field.

Clapton is shared between Faroe (30%) Dana Petroleum Norway (20%), Lundin Norway (18%), Norwegian Energy Company (12%) and Det Norske Oljeselskap (10%).

Faroe chief executive Graham Stewart said the prospect was close to a number of giant oil fields in the area.

"This is an exciting period for Faroe Petroleum with three high-impact exploration wells drilling at the same time," he said.

"We look forward to the results of the Cooper well in the Norwegian North Sea (Faroe 30%), the North Uist exploration well west of Shetland (Faroe 6.3%) together with our own operated Clapton well."